For most people, receiving an inheritance is something good, but for a nursing home resident on Medicaid, an inheritance may be a mixed blessing. Most Medicaid categories, but not all, have strict income and resource limits. An inheritance can make a Medicaid recipient ineligible for Medicaid. Careful planning before death can usually make sure an inheritance doesn’t have a negative impact. When death occurs before such planning, here are the general rules for many categories.
An inheritance will be counted two different ways. You or whoever is representing you will have to inform the state Medicaid agency. First, it is counted as income in the month it is received. If you receive an inheritance and the amount puts you over the income limits for your state, you will not be eligible for Medicaid for at least that month. If you can properly spend down the money in the same month it is received, however, you will be eligible for Medicaid again the following month. If you cannot spend it down the same month, your Medicaid ineligibility won’t end until you have again spent down your assets to the countable limit, which is $2,000 in most states (including Virginia). The first thing to do is pay the nursing home for the current month.
If you have money left after paying the nursing home, your elder law attorney can advise you on various ways to expend the money. You may be able to fund a “payback” trust you create for yourself, or simply give it to your “community spouse”, or to a disabled child either outright or in trust. You may also pre-pay for funeral services for yourself or your spouse. It could also be spent on travel, dining out, clothes, television, DVD player, and paying off any debts you may have. In most cases, you cannot make gifts with the money, but there are some exceptions to this rule and in some states good planning techniques that may permit some gifting. To be sure, you will need to consult with your elder law attorney.
The Elder Law team at ThompsonMcMullan would be happy to consult with you when a Medicaid beneficiary receives an inheritance. We have frequently helped clients use all of the strategies mentioned in this article (and many that aren’t) to manage their inheritance in a Medicaid-appropriate fashion.
*This article is provided for persons interested in elder law issues in Virginia and across the United States. This article has been written by a practitioner in the field of elder law, but unless otherwise noted, the writer is not affiliated with ThompsonMcMullan, P.C. Nothing in the newsletter or the articles is, or is intended to be, legal advice or a substitute for legal advice. If you need legal advice of any kind, please consult an attorney with experience in that area of the law, whether in our firm, or otherwise.