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SBO Trusts No Longer Valid in Michigan to Protect Assets of Community Spouse

17.10.2014 by Law Firm of Seglund Gabe Pawlak & Groth in Estate Planning

Ever since 1993, so-called SBO Trusts (SBO=“solely for the benefit of”) have been used to protect the assets of a spouse (the “community spouse”) when the other spouse goes into a nursing home and receives Medicaid benefits to pay for the nursing home care. These SBO Trusts had been interpreted by the Michigan Department of Human Services (DHS) as containing exempt or non-countable assets because they were unavailable to the nursing home spouse. Thus, when reviewing the applications for Medicaid benefits on behalf of the spouse going into the nursing home, the attorney was always able to factor out the assets in these trusts.

Without prior notice and as a complete surprise to all practitioners in this area, the DHS has suddenly reversed it’s interpretation of the policy and declared that the assets in the SBO Trust are not exempt and will count against the nursing home spouse in determining eligibility for Medicaid.

This decision has taken the legal community completely by surprise as to the reason for the change in interpretation as no prior notice of the change was announced by DHS.

Clients and prospective clients should stay tuned for further developments in this area as the legal community develops alternate means of accomplishing the same goals, and as likely appeals will be filed. Some alternatives to the SBO trust currently exist and anyone who has one of these SBO Trusts should consult their estate planning attorney as soon as possible to get advice and alternatives for changing their plans in light of the new interpretation.

Appeals are likely and the legal community is working diligently to develop alternate methods to accomplish their clients goals of protecting the community spouse, but care should be taken at this time and close communication with your attorney is recommended.

Please call us for an appointment to discuss your current estate plan and the effects of this new policy interpretation.

 

 

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