Whether single or married, the Last Will and Testament of a Medicaid applicant will have little impact because at the time of death the applicant will have no more than $2,500 in his or her name. The Will of the applicant’s spouse, however, can have a substantial impact on the applicant’s eligibility for benefits. Theoretically, the community spouse is in better health and has a greater life expectancy than the institutionalized spouse but precautions should be taken to avoid the possibility that the community spouse predeceases the institutionalized spouse.
Typically, sweetheart Wills leave the residuary estate outright to the surviving spouse or, alternatively, to the children. If one spouse is institutionalized and receiving Medicaid benefits, the inheritance from a predeceased community spouse may cause the institutionalized spouse to become resource overscale (exceeding the $2,500 resource limit) and may lose the benefits that you have worked so hard to secure and may jeopardize the assets you have worked so hard to protect.
Maryland Code Ann., Estates and Trusts Article § 3-203 establishes that a surviving spouse is entitled to elect a minimum one-third share of the decedent’s net probate estate instead of honoring the terms of the decedent’s Will. In the context of Maryland Medicaid eligibility, this permissive statute creates a “right” to inheritance in the surviving spouse and, further, when the surviving spouse is a Medicaid recipient, treats the recipient’s failure to claim his or her statutory share as a transfer subject to penalty (i.e., a gift). Maryland Medicaid rules provide that waiving the right to receive an inheritance is a transfer subject to penalty.
(Note: this is the crux of the elective share debate among elder law and estate planning practitioners. Elder law practitioners generally advocate for the minimum probate estate to be used in calculating the elective share because of the impact such election may have on a Medicaid recipient’s continued eligibility. Estate planning practitioners, on the other hand, generally aim to protect the inheritance rights of the surviving spouse and tend to support the theory of an “augmented estate” (one which includes any asset whether probate or non-probate over which the decedent maintained dominion and control at the time of death, including accounts with beneficiary designations or assets titled in the decedent’s revocable trust.)
Nevertheless, the goal of the community spouse is to minimize to the greatest extent possible his or her probate estate so that the assets subject to an elective share claim are minimal. Therefore, the community spouse’s Will should be updated either to disinherit the surviving spouse (with the understanding by the family that if the surviving spouse is receiving Medicaid benefits he or she will be penalized for failing to make the election) or to limit the surviving spouse’s share to no more than the minimum elective share.
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Shannon L. Hammond is a founding member of Hammond Law, LLC. She is a graduate of the University of Baltimore School of Law and is admitted to practice law in Maryland, the District of Columbia, and before the U.S. District Court for the District of Maryland. She is a member of the National Academy of Elder Law Attorneys (NAELA), the Coalition of Geriatric Services (COGS), and the Elder Law and Estates and Trusts Sections of the Maryland State Bar Association. She was named a Rising Star in the 2013 Maryland Super Lawyers list, published by Baltimore Magazine.
Shannon is a frequent lecturer on legal issues involving Medicaid, estate planning, and probate. She has taught “Strategic Planning for Aging and Asset Protection,” at the College of Notre Dame of Maryland Renaissance Institute and “Legal Issues and the Elderly,” at the Johns Hopkins University Odyssey Program. Shannon was also recently appointed to the Board of Directors for the Maryland non-profit organization “By Their Side“, which advocates for developmentally disabled Marylanders and their families.
Shannon has dedicated her career exclusively to the practice of Medicaid and estate planning. Shannon is deeply committed to assisting clients in great need and zealously advocates for those with diminished capacity.