Shalloway and Shalloway, P.A.

Qualified Elective Share Special Needs Trust

Lady signing her last will and testament

When a married individual decides to apply for Medicaid benefits, the applicant’s spouse will almost always need to execute a new last will and testament. If the applicant’s spouse has a pre-existing last will and testament, it typically devises most, if not all, of the estate to the Medicaid applicant-spouse. Even if the applicant’s spouse does not have a last will and testament, Florida’s intestate law directs most, if not all, of the deceased spouse’s estate to be distributed to the surviving spouse. In either case, this may result in a Medicaid recipient losing Medicaid coverage due to receiving an inheritance that exceeds Medicaid’s $2,000 asset cap.

In trying to solve this problem, a Medicaid applicant’s spouse may have the idea of disinheriting their Medicaid applicant-spouse in order to avoid jeopardizing Medicaid coverage. However, this does not solve the problem because under Florida’s spousal elective share law, a surviving spouse is entitled to claim 30% of the deceased spouse’s estate. This law is meant to protect surviving spouses from impoverishment should the deceased spouse attempt to completely disinherit the surviving spouse. Although Florida law does not mandate the surviving spouse exercise the right to receive the elective share, Medicaid will treat a surviving spouse’s refusal to take the elective share as triggering a transfer penalty. This means the financial value of the spousal elective share divided by $8,944 (Medicaid’s divisor, which is meant to approximate one month of long term care costs) will generate the period of Medicaid ineligibility in number of months (e.g. a spousal elective share of $89,440 would cause 10 months of Medicaid ineligibility if the surviving Medicaid recipient-spouse refuses to take the elective share). Since Medicaid is a payer of last resort, it expects individuals to exercise their discretion in favor of acquiring additional resources that can be used to pay for long term care costs.      

In order to avoid loss of Medicaid coverage in this scenario, the Medicaid applicant’s spouse can execute a last will and testament that creates a qualified elective share special needs trust. As long as this qualified elective share special needs trust is funded with at least 30% of the deceased spouse’s estate, then it will satisfy Florida’s spousal elective share while also preserving Medicaid for the surviving spouse since money held in such a trust does not constitute a countable asset. This arrangement also requires a third party, such as a child or other relative, to serve as trustee of the qualified elective share special needs trust. In order to execute a properly drafted qualified elective share special needs trust, it is important to consult with an Elder law attorney experienced in preserving Medicaid coverage.        

Shalloway & Shalloway, P.A., is located in West Palm Beach, FL and serves clients in Palm Beach, Broward, Dade, Okeechobee, Martin and St. Lucie Counties.

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