How Do You Ensure the Care of a Chronically Ill Spouse if He Outlives You?

Consider establishing a trust
One of the most important considerations when leaving a spouse behind is how his or her care will be paid for. When one spouse dies, the couple’s assets ordinarily pass automatically to the surviving spouse, even in the absence of a will. This isn’t always a good thing, however. Establishing a living trust—so called because you fund it while you’re alive—is one way to avoid the problems that can occur if you let your spouse inherit everything directly.

If your assets pass to your spouse, and he or she has not designated an agent using a power of attorney, a court-appointed guardian will have to be named. If assets—including real estate and bank accounts—are transferred to a trust, on the other hand, a trustee will already be in place and the money will be designated for your spouse’s care. Using a living trust instead of a will also obviates the need for probate, the often lengthy and costly process by which a court settles an estate (including any disputes over the will).

When you establish a trust, you should name yourself as the trustee and also name a successor to administer the trust if you die or become incapacitated. "If you have the trust set up, and you fund the trust, then the successor trustee can step in much more easily to help the chronically ill person take care of their affairs," says Constance Stone, a certified financial planner with Stepping Stone Financial in Chagrin Falls, Ohio.

Bequeathing your assets directly to your spouse, moreover, can disqualify him or her from government assistance programs. Medicaid, for instance, sets very low asset ceilings for eligibility ($2,000, typically, though it is higher in some states). As long as you fund the trust more than five years before your spouse applies for Medicaid, the trust can hold the assets you leave your spouse without being considered his or her personal property, thereby allowing your spouse to be eligible for Medicaid. "Then the assets in the trust can be used to pay for things other than what Medicaid pays for," says Peter J. Strauss, a partner in the firm of Epstein, Becker & Green P.C. of New York.

Living trusts aren’t appropriate for everyone, however, and the relevant laws are complex. To learn more about trusts, contact an estate-planning attorney or a certified elder-law attorney. The National Academy of Elder Law Attorneys features a searchable directory on its website.