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Inheritances Can Have Unintended Effects of Medicaid Benefits

Money

Although the idea of receiving an inheritance may or may not be a positive thing, depending on who it is that passed away and left you the inheritance, there is one kind of inheritance that is almost always bad: The kind that jeopardizes your Medicaid benefits. Unfortunately, many Florida seniors lose or risk losing Medicaid benefits, because they don’t properly plan in advance for expected inheritances.

How Inheritances Can Hurt

Medicaid is need based; if someone earns more than a certain amount or has assets that exceed a certain value, they will lose their Medicaid benefits.

Imagine an elderly person living in a nursing home paid for by Medicaid. A relative passes away, and leaves that person a healthy inheritance. That inheritance is now an asset, or income, and the result of the inheritance could be losing Medicaid benefits.

The elderly person now will have to pay for the nursing home out of pocket. That likely means using the inheritance money to pay for the nursing home. When the inheritance is spent, the resident can re-apply for Medicaid, but that’s not how the deceased anticipated the inheritance being used, and surely there are better ways that the resident could have used those funds.

Protecting Medicaid

There are some ways that the inheritance could be used that wouldn’t risk the loss of the Medicaid benefits, for example, fixing up a household, if the person lives at home.

This is where a trust can be a huge benefit. A Medicaid trust that says it only supplements Medicaid benefits won’t be counted as income or assets. The trustee can use that money to pay for extra medical expenses that exceed Medicaid, or other amenities to improve the person’s life.

The trust must be set up while the beneficiary is still alive. If it is not, and the beneficiary is legally entitled to get the inheritance, the beneficiary will have to accept the funds. Even if the beneficiary tries to disclaim the funds, Medicaid will still consider the inheritance as having been received by the beneficiary, and then voluntarily gifted to whoever ends up getting it.

This is important for people who leave money or property in their estate documents to consider. A gift that is meant to be well intentioned can actually end up creating very serious problems for the person they were trying to help. Contact Tampa estate and business attorney David Toback to discuss a comprehensive estate plan unique to your situation and your assets.

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