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  • Writer's pictureAlan D. Feller, Esq.

Surprisingly Common Estate Planning Mistakes People Make When A Spouse Dies

Loss is inescapable. The people who ride along with us on our many and varied journeys exit our lives at some point. What remains is a deafening quiet and a permanent interruption to the patterns and routines of daily life. Besides the emotional toll that a spouse's passing exacts, there are estate planning and financial implications for the surviving spouse. In those times, the desire to maintain the status quo is a powerful one. A deceased spouse's voice can still be heard on the voice mail recording and their name does not get removed from bank accounts and deeds. These little acts of remembrance are mostly inconsequential, but purposeful avoidance of basic estate planning tasks can lead to extremely unsettling outcomes.

Spousal financial arrangements and marital estate planning usually allow the surviving spouse to easily inherit the entirety of the deceased spouse's financial assets. This first rung of planning is cooperative and orderly. Once all of the assets are in the survivor's name then the path forward can become murky and foggy. A Will created years before may not reflect the current family dynamics. The spousal provisions in the old Will, including naming the spouse as Executor, were straightforward and simply exercised for the first spouse to pass. Now, a successor executor may be a sibling who is no longer in the picture or an adult child who has been less than wonderful. This same logic applies to beneficiaries. Update your Will.

Surviving spouses who maintain all of their assets in their own name are taking a big risk. Should they suffer an illness or a fall which requires long term care, the cost of such care can be daunting. Applying for Medicaid is the way to control long term care costs. Basic Medicaid Planning entails the processing of asset transfers to get below the $15,750 threshold and protecting the primary residence which can be subject to Medicaid collection efforts. The closer in time the transfers are undertaken to an actual long term health care crisis, the more likely an asset transfer penalty will be assessed. Home Care Medicaid, using 10/1/2020 and later as a cutoff date will be penalizing transfers made after that date for applications starting next year. These penalties are tied to the amount of the transfers divided by the average care rate for the region. An assessed penalty will cause the ill person to pay privately for care for the length of the penalty. Nursing Home Medicaid employs a similar penalty system that extends 5 years in the past. The best way to avoid these issues is to utilize trust planning and transfers as soon as is practical following a spouse's passing.

Besides Wills, many times a married couple will have executed Powers of Attorney, Health Care Proxies and Living Wills together. Leaving these old documents in place can be a huge mistake. Powers of Attorney and Health Care Proxies/Living Wills need to be updated if the information and the people listed within have materially changed. Documents drafted decades earlier may not refer to the important people currently in your life or reflect your growing reliance on an adult child. The reality is that the friend you chose to be your successor power of attorney in 1997 may no longer speak with you. Difficulties arise when surviving spouses fail to make basic estate planning adjustments and adapt to this next phase of life.

Missing someone you love is a natural reaction. Their essence resides with you forever, but your wellbeing is also connected to how you take control over your life in the here and now. Talk to the professionals at Sloan and Feller today to gain more insight on surviving spouse estate planning.



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