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Is there a penalty if we deny a inheritance while on medicaid?

My mother went on Medicaid in March after having to spend down and go to a full care nursing home. She recently was named as a beneficiary of a inheritance. If we take the inheritance she will be kicked off medicaid and we will have to spend down. The amount is small and basically in 2 months will have to go back on medicaid as she will be out of money from paying full price at home. Are there penalties to her if we just don't accept the money? We live in Nebraska.
Status: Open    Nov 09, 2015 - 08:08 AM

Medicare/Medicaid, Elder Law

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Nov 11, 2015 - 09:35 AM

Medicaid is state-specific, so you would need to check with an Elder Law attorney in your state to be sure, BUT in general, this is how it works:

Yes, an inheritance is a resource to Medicaid, and as such, needs to be spent for her care if it takes her over the $2,000 cap. However, some states will allow you to set up a Pooled Trust (sometimes called a Supplemental or Special Needs Trust) to hold the money and she will then only lose one month of Medicaid benefits. The money in trust still has to be used for her care and anything left over will go to Medicaid, but you can use the money to pay for caregivers for her along with a list of other things. Contact an Elder law attorney in your area for details.

Nov 11, 2015 - 10:50 AM

Medicaid requires that the recipient apply for and accept all other benefits to which he or she is entitled. Disclaiming an inheritance is treated as acceptance followed by a gift which is penalized as a transfer.

Nov 12, 2015 - 03:47 PM

If she disclaims an inheitance Medicaid will treat it the same as if she had the money and gave it away. At least in most states. In Alabama there is the Alabama Family Trust which is a pooled trust mentioned by Mr. Nolan. If Nebraska Medicaid allows this, and it should, you can place the money in a self-settled special needs trust. Then the money would be available to purchase things or services not covered by Medicaid while not being counted as an asset toward her limit. If she passes with money left in the trust it would be given to Medicaid up to the total amount of Medicaid benefits she has received. You could possibly do this without losing Medicaid benefits at all or possibly 1 month. Check with a local elder law attorney.

Nov 16, 2015 - 01:58 PM

Generally, a Medicaid recipient must look to all funds available to her to help pay for her care. As a recipient of an inheritance, this likely should be reported to the state’s local Medicaid agency. Please check your state’s reporting requirements. You may wish to contact an elder law attorney in your state to determine if any strategic planning may be done when the inheritance is received.
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