Listen to Lawrence…Spousal Refusal vs. Irrevocable Trust

DAVIDOWLAW Uncategorized

Dear clients and friends,

I am amazed at the reaction to a previous post. I usually get a lot of questions about my legal LISTEN TO LAWRENCE posts, but yesterday’s set new records. Everyone wanted to know about my new puppy. What’s her name? What kind of dog is she? Where did you get her?

Her name is SIMMIE and she is a 12 week old HAVASHU, a cross between a Havanese and Shih Tzu. She is 5 1/2 pounds and will probably grow to be somewhere between 10-15 pounds. I got her at Sportsman’s Kennels in the Riverhead area. They have been around since 1962 and have an excellent reputation.

My better half, Jihane, and I also have a 6 pound, two year old MORKIE, a cross between a Maltese and a Yorkie. Her name is JAMMIE, short for Jamillah, which means beautiful in Arabic. In the interest of world peace, the name SIMMIE is short for Simcha, which means happiness in Hebrew.

At this crazy time, we all need a little morebeauty and happiness in our lives!

Now, here is one of your questions and my answer:

QUESTION
I enjoy reading your question and answer sessions. I would like to know what is the difference in a couple using the Spouse Refusal law and making an Irrevocable Trust? I am talking about the middle class, not high wealth or holdings. It seems to me there is no need to spend thousands on a trust when the spouse can just say, “I will not pay.” Thank you.

MY RESPONSE
The answer all depends on your goals. If your ONLY goal is to protect your assets for your spouse, then spousal refusal is a very effective tool. The concept is for the spouse needing Medicaid to transfer all their assets to the well spouse (no transfer penalty between spouses) and then, the well spouse “refuses” to spend any of that money on their spouse’s care. The incapacitated spouse will get Medicaid and no trust will be necessary. This all depends, of course, on New York not eliminating spousal refusal, which they almost did this year and may next year or soon thereafter.

But what happens when the first spouse dies and the second spouse needs Medicaid? You can only do spousal refusal if you still have a spouse! If your goal is to also protect your assets for your children, which it is for most of my clients, then an Irrevocable Trust may be the right tool in the tool shed for you. By placing certain assets in an Irrevocable Trust, those assets will be protected after a five year look back for nursing home Medicaid and after a new 2 1/2 year look back for home care Medicaid.

So the answer to your question forces you to identify your goals and then talk to us about the solutions. I hope this helps.

Please forward this email to your friends and relatives.

As always, please send me your questions. If you are thinking about it, others are probably too, so my answers will no doubt help you and many others.

Let’s stay connected.

LISTEN TO LAWRENCE

Stay safe!