The "I Love You" Will Trap
Many married couples have basic "I Love You" wills that they have had for years. These wills leave everything outright to the surviving spouse. An "I Love You" will may be fine if you are 25 and in good health, but if you are older and die with an "I Love You" will, you may have just given everything you own to the government! The reason for this is Medicaid estate recovery.
Here’s what can happen. I have had several clients with variations of the following scenario. One of the spouses is in a nursing home receiving Medicaid long-term care benefits due to dementia. The other spouse is healthy and still living in the family home. The couple has simple “I Love You” wills executed twenty to thirty years earlier. They obtained these wills through free will events, the military, or online. They have not done any proactive planning and do not have long-term care insurance.
Then disaster strikes; the “healthy” spouse dies first with a will that leaves everything outright to the nursing home spouse. Translation: Medicaid just inherited the entire family home and any other jointly-titled property, bank accounts, stock and even the family car. Why does this happen? Medicaid long-term care benefits come with a string attached. The string gives Medicaid the right to recover against the estate of the Medicaid recipient. When the nursing home spouse obtained Medicaid long-term care benefits, Medicaid obtained the right to recover against assets owned by the nursing home patient at death. Prior to the death of the healthy spouse, the nursing home spouse owned about half of the couple’s assets. When the healthy spouse died first, the nursing home spouse inherited the other half of the assets. Now all of the couple’s assets are in the nursing home client’s estate and subject to estate recovery! Those free wills just cost the couple hundreds of thousands of dollars. Sadly, their children and grandchildren also lost any inheritance that would have come their way had appropriate planning been in place.
Had the “I Love You” wills been updated to reflect the reality that people are living longer and are more likely to need long-term care, approximately half of the couple’s assets could have been preserved for their children and grandchildren. Had the couple done proactive planning, even more of their assets could have been saved.*
If you are worried about your “I Love You” wills, call Nancy's assistant at 704-887-5242 to set up an appointment and see if you can work directly with Nancy to review and update your estate plan.
*With the right type of proactive planning, almost all of the couple’s assets could have been preserved.