What exactly is Hospice? Hospice is a specialized type of medicine for the terminally ill. It is an interdisciplinary form of treatment where a team of caring, dedicated professionals focus on helping the terminally ill achieve symptom and pain relief, while at the same time providing guidance and support to family members. Hospice services can be provided in the home, hospital, at assisted living or nursing homes.
Families dealing with the harsh affects of a terminal disease along with the emotional turmoil, don't usually focus on the need for estate planning and what can be done for the security of the surviving spouse. For example, after the death of a terminally ill patient, many times the surviving spouse becomes the sole owner of all property. The most common ways are when the surviving spouse is a joint owner or designated beneficiary of an asset (i.e. home, IRA, life insurance). Another way is through the deceased spouse's Will which states that all assets shall pass to the surviving spouse. These types of Wills are often referred to as "I love you Wills".
A problem arises later if the surviving spouse needs nursing home care. Recent law changes increase penalties and makes the protection of assets by gifting them to children difficult. A single person who is seeking medicaid (federal/state program which pays for long term care) is only allowed $2,000 of countable assets. Upon death, the home and other assets may be subject to medicaid liens. This means the assets won't pass to surviving loved ones. Many times the predeceased spouse also applied for medicaid and family assets already had to be spent down significantly to become eligible.
So, what is "Hospice Planning"? Generally, it involves the expedited use of basic or advanced estate planning techniques such as wills, powers of attorney, trusts, gifts and other methods for the benefit and security of the surviving spouse.
A technique which is hardly ever used, can result in the protection of 100% of the surviving spouse's assets, through a testamentary trust. Testamentary trusts, unlike most other trusts are given favorable treatment under the medicaid rules. A testamentary trust is created in the Will of a deceased spouse. All assets passing into the trust through the probate process are protected for the benefit of the surviving spouse. These assets are not countable for medicaid purposes in the future and are not subject to medicaid liens. They are used at the discretion of the trustee (usually a family member) for the sole benefit of the surviving spouse. Any assets remaining in the trust upon the death of the surviving spouse, are distributed to the successor beneficiaries named in the Will.
As death of the terminal spouse is assumed, most assets can be transferred to the terminal spouse prior to death for maximum protection. The only pitfall is that the terminal spouse's estate must be probated to fund the trust and accounts filed with the court during the surviving spouse's lifetime.