Medicaid is a government health care plan to provide the indigent and handicapped with basic medical services. It has stringent eligibility restrictions on the recipient’s allowed income level and assets. If a disabled person inherits money directly, it can disqualify him from Medicaid coverage.
Medicaid is federally subsidized but run by the states. Each state has different eligibility requirements, but all place caps on assets that can be held in the recipient’s own name, as well as the amount of income that can be directly received before the recipient is disqualified. Some assets, such as home equity, cash value life insurance and certain kinds of annuities, are not counted against the recipient. In each case, Medicaid holds a lien against the estate and will move to recover its costs before the heirs can receive inheritances.
If a disabled Medicaid recipient receives a lump sum inheritance without proper planning, he may be disqualified for Medicaid or other government benefits, such as food stamps. This may result in the rapid spending of assets that were meant for the disabled person, as health insurance premiums or costs of care must now be paid out of pocket. The individual will have to become destitute again before he can qualify again for benefits.
Special Needs Trusts
If you expect your disabled child or other heir to need Medicaid, consider establishing a Special Needs Trust. This trust can receive the inheritance, and trustees can administer it for your child’s benefit, without endangering eligibility for Medicaid or other needs-based assistance programs.
Jason Van Steenwyk has been writing professionally since 1998. A former staff reporter for "Mutual Funds Magazine," he has been published in "Wealth and Retirement Planner," "Annuity Selling Guide," "Registered Rep." "Bankrate.com" and "Senior Market Advisor." He holds a Bachelor of Arts in humanities from the University of Southern California.