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Case Study: Receiving an Inheritance? It May Impact Your Medicaid Benefits

January 8, 2021

The windfall of an inheritance—expected or unexpected—can feel like a blessing for many. However, if you’re receiving Medicaid benefits, or may need to apply for Medicaid, an inheritance can have a significant impact on those benefits.

In one recent case, a Moen Sheehan Meyer client receiving Medicaid benefits approached us soon after their parent passed away. The client was entitled to a substantial unrestricted inheritance (unrestricted meaning the recipient receives it outright), and they were—correctly— concerned that it could affect their Medicaid benefits.

Through a series of phone calls, we were able to quickly identify which Medicaid programs they were participating in to receive benefits and determine how those benefits may be affected by the inheritance. We confirmed that they would lose Medicaid benefits, including healthcare insurance, if they received the inheritance through traditional means like cash, interest in retirement accounts, etc. Their Medicaid benefits would have been lost until they spend down the inheritance.

We helped the client understand the asset limits (what they could own and still retain their Medicaid benefits). Then, we worked with them to create a plan for how they could receive the inheritance in the best way to reduce or eliminate the possibility that they would lose benefits, while at the same time ensuring they received the most benefit from the inheritance as possible. Because they sought advice of a qualified attorney, they were able to protect a significant portion of the inheritance while retaining their Medicaid benefits.

If You’re Leaving an Inheritance

For many families, leaving a legacy to their children or other loved ones is very important. However, when the recipients are receiving Medicaid, or may need to apply for Medicaid, receiving a sum of money as part of an inheritance can cause problems with Medicaid eligibility. The best option is to plan ahead for this possibility and to develop an appropriate gifting strategy. Experienced estate planning attorneys can help identify appropriate strategies for leaving an inheritance, taking into consideration many factors, including debt paydown, burial trusts, special needs trusts, and the possible impact to the recipient’s Medicaid eligibility.

If You’re Receiving an Inheritance

If it’s not possible to plan ahead for an inheritance, for example, if your loved one has already passed away, seek help from one of our attorneys before the assets are distributed. As in this example, we can help you understand the potential implications of receiving that inheritance and the options available to you to maximize your benefits.

 

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