What Does Spend-Down Inheritance Mean?

What Does Spend-Down Inheritance Mean?
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To be eligible for most government assistance, you must have low income and limited assets. Because the money you receive qualifies as an asset, inheriting from an estate can affect your ability to qualify for these programs. If you receive assistance from such programs and you inherit a large amount of money, you may consider spending down your inheritance to maintain your eligibility.

About Spending Down

Spending down an inheritance is the process of transferring or spending a portion of the funds until your assets are below an acceptable amount. Most programs will regard your inheritance as income in the month you receive it, which will usually make you ineligible for benefits during that month. However, if you spend down the money by the next month, the program may reinstate your benefits.

Government Assistance

An inheritance can affect your eligibility for most low-income government programs including Section 8, Medicaid, Social Security Disability Insurance and Supplemental Security Income. The amount of money you need to spend will vary based on the requirements of each program. As of 2011, most of these programs have a household asset limit of $2,000. This limit may be higher for applicants with more dependents.


If you don't want to spend your inheritance money, you can lower your countable assets by giving the funds to a spouse. You can also pay for a funeral contract or create an irrevocable trust. Government programs won't consider money you place in an irrevocable trust to be an asset anymore. However, you can't usually change the terms of the trust once you have recorded it.

Nursing Homes

Many individuals living in nursing homes and receiving assistance from Medicaid encounter problems when they receive an inheritance. If you or your spouse receives an inheritance before obtaining assistance from Medicaid, it will include the funds in your countable assets. However, if you are living in a nursing home and your spouse receives an inheritance, the money won't affect your eligibility for Medicaid.