If society wanted it there would be no need for a spenddown. Unless they want her to spend her $500K on her heirs but don’t care if the 56 year old hit by a bus can spend his money on his heirs. It’s not like someone said one day " Oh, let’s find a way for some people to be eligible for Medicaid and still preserve their assets for their heirs". It’s an unintended side effect and it can in fact be done without using a trust. It would be impossible to prevent it completely without those efforts having their own unintended consequences. ( Such as 50 yo couple deeding their house to their children and retaining a life estate)
Or she can use her intellect and assets to do what she is doing.
That’s the reason. It’s exactly the same reason why monarchies are hereditary positions. Large fortunes, passed on through trust funds, are the modern day equivalent to the lands and castles that aristocrats/nobility would pass down to their heirs ad infinitum.
The long term outcome of capitalism appears to be that all wealth and all property, save a paltry few shacks that the peasants own, will be in the hands of a small number of aristocrats once again. They control the government and have made it where it is legal to pass their assets from generation to generation tax free.
Why do you think we have a national debt at all? The reason is that the wealthy with all the money used their clout to spread incorrect ideas to reprogram the ignorant portion of the population to believe that their interests are being served. Those ignorant masses voted in politicians who lowered taxes on their wealthy campaign donors to the point that the government was spending more money than it was collecting in taxes. This has then continued for over 30 years.
If there weren’t trust funds and an unavoidable 50% or so tax on estates over 5 million, we probably wouldn’t have a national debt at all.
As a side note, if the Federal government ever starts doing this, retrieving from the wealthy the money needed to pay the national debt off, it will be analogous to the end of the aristocracy during the age of cannon. After cannon were invented, it was possible for central governments to go around and force the individual aristocrats to pay the king’s taxes or else. The “or else” was destroying their castle with a cannon and looting it.
The societal benefit of things like The Spousal Impoverishment Act, and trusts to protect assets from long term care costs goes like this:
A husband and wife have enough cash flow in retirement to provide for themselves. One suddenly needs expensive long term care and the couple spends down all of their assets to provide for this need. The well spouse is now so poor that he/she may not be able to provide for themselves and now there are two people on assistance. By limiting how much the couple has to spend and protecting assets, there is now only one person on aid. This represents a net savings to society.
An alternate argument is that people who accumulate a moderate amount of means, pay into social programs and entitlements their entire lives while receiving little benefit. The idea that they can tap into that in specialized difficult circumstances such as this, gives them a payback which justifies the continued drain on the working generations who remain willing to pay knowing that they have these kind of contingencies covered.
It is also theorized that these kind of things don’t really tend to benefit the super wealthy, but just mid level affluent types as the very wealthy just easily absorb the cost of care.
To protect against abuses these trusts and laws typically have a look back period. Let’s say a Couple has a net worth of 10 million dollars and suddenly the wife needs to go into a nursing home. The husband would like to get the state to pay for it so that he can keep all the money, so they move everything out of joint name so the wife is now impoverished and receives state aid. Unfair? Yes. There is a 7 year look back. This means that as far as the government is concerned she is still considered as owning her half of the ten million until 7 years have passed in terms of qualifying for aid. Most nursing home stays are under 3 years, so dodging nursing home costs with this kind of tactic is a dubious prospect. In my experience it mostly serves as a vehicle for elder care lawyers to sell trusts and rack up fees and is unlikely to have any actual utility.
The cost of paying for a nursing home for a spouse can be absolutely devastating on middle class retirees. Putting the remaining spouse in the poor house and destroying two lives because of a catastrophe with one life is not in society’s best interests.
Trusts are legal fictions, but I think you need to better define by “Shielding against loss.” I for example have a trust that would be created in the event of the untimely death of my wife and I. It would be funded by a term insurance policy we took out and put enough money into the trust to raise our children through college age. My brother or one of several other contingent trustees would run the trust on behalf of my children and pay out the money necessary feed clothe and school them. So, I guess yes, this is shielding against loss, the loss of parents, the loss of my children’s future, the loss of burdening relatives with the costs of my children, etc. I think this is a good thing.
Trusts do all kinds of things, for example there is a charitable remainder trust. What this trust does is let wealthy people make a gift to charity while they are alive. They get a tax deduction for doing so, and they get the income from the trust while they are alive so that they get a benefit. This lets people give money to charity who otherwise wouldn’t because they need the income while they are alive… When they die the charity gets the $.
Another kind of trust might exist for an old lady, that was set up by her deceased husband. The trustee manages the money and pays the bills and gets the lawn mowed and takes care of the old lady who does not have the ability to manage these things herself. This allows her to stay in her home and avoid the costs of going into a facility