For most people, receiving an inheritance is something good, but for a nursing home resident on Medicaid, an inheritance will ordinarily result in that person losing his or her Medicaid benefits due to receipt of “excess resources.” In Pennsylvania, non-exempt countable assets of a Medicaid applicant or recipient in excess of $8,000 ($2,400 for persons whose monthly income exceeds $2,382) results in forfeiture of benefits. Fortunately, careful planning, with the assistance of a qualified elder law attorney, will enable a Medicaid recipient to protect a large part of his or her inheritance and re-qualify for benefits.
If the inheritance is small, it may be practical to spend it all in the month of receipt for needed items or services, especially if the applicant has a “community spouse.” This will enable the Medicaid recipient to avoid termination of benefits. But in most cases the inheritance will be too large for that to be a practical solution. A variety of asset protection strategies can be employed to protect such larger inheritances.
Keep in mind two important points applicable to residents of Pennsylvania nursing homes:
Assets that come into the hands of a Medicaid recipient, whether by inheritance, sale of an exempt asset (including a recipient’s unsold home), gift, lottery winnings, or otherwise, ARE NOT SUBJECT TO A REIMBURSEMENT CLAIM FOR PREVIOUSLY PAID MEDICAID AS LONG AS THE MEDICAID RECIPIENT IS ALIVE. The State’s right to reimbursement only attaches to the probate estate of a deceased Medicaid recipient. Instead, these assets can, with proper planning, be protected for one’s family without first reimbursing previously paid benefits.
Presently, there is a COVID-related federally mandated moratorium on terminating the Medicaid benefits of a person who ordinarily would be disqualified due to the receipt of excess resources. The moratorium does not apply to gifting, which still incurs a penalty in the form of a period of ineligibility for benefits. So, a Medicaid recipient who receives an inheritance can put the funds in a bank account in joint names with a non-spouse family member and sit tight until the moratorium is lifted. Meanwhile, if the recipient dies, the entire inheritance will pass to the co-owner free of the State’s reimbursement claim.