Why Inheritances and Medicaid Don’t Always Mix
When a loved one is receiving Medicaid, especially for long-term care, an inheritance can cause serious unintended consequences. Many families are shocked to learn that even a small inheritance can disqualify someone from Medicaid benefits, forcing them to cover expensive care costs out of pocket until they once again meet eligibility requirements.
At The Mundheim Firm, we regularly help families navigate this sensitive situation. With the right knowledge and quick action, it’s possible to preserve both the inheritance and essential Medicaid coverage. Below, we outline four key steps that can help protect your loved ones and their benefits.
1. Understand How Medicaid Treats Inheritances
Medicaid is a needs-based program, which means eligibility is determined by both income and assets. In Texas, someone receiving long-term care Medicaid generally cannot have more than $2,000 in countable assets. If that person inherits money, real estate, or other assets, even unintentionally, it could immediately put them over the limit.
Once over the threshold, Medicaid may suspend or terminate benefits until the individual “spends down” their assets appropriately. Inheritances that aren’t planned for can trigger disqualification, delays, and significant financial stress for families.
2. Act Quickly: Timing Matters
If a loved one on Medicaid becomes entitled to an inheritance, time is of the essence. Medicaid must be notified, and any delay in responding can limit your options and increase the likelihood of benefit suspension.
Seeking legal counsel right away allows you to explore important options such as:
- Disclaiming the inheritance (if it hasn’t been accepted)
- Spending down in a Medicaid-compliant way
- Creating a special needs trust (for a disabled recipient)
These strategies only work if they’re implemented quickly and correctly. The longer you wait, the fewer tools you have to protect both the inheritance and Medicaid benefits.
3. Use Strategic Tools to Preserve Medicaid Eligibility
The good news is that Texas law provides several ways to handle an inheritance without completely sacrificing Medicaid coverage if done correctly. Depending on your situation, an attorney might recommend:
- Disclaiming the inheritance – Legally refusing it before taking possession, allowing it to pass to the next beneficiary
- Creating a Special Needs Trust – Ideal for disabled beneficiaries, this tool holds the inheritance without counting it as an available asset
- Using an Irrevocable Trust – When planning ahead, this can shelter assets while maintaining eligibility
- Spend-Down Planning – Paying off allowable expenses (like medical bills or home modifications) in a way that complies with Medicaid rules
Each of these options has strict legal requirements and must be tailored to the specific circumstances of the beneficiary and estate.
4. Plan Ahead to Avoid Disruption
The best way to prevent Medicaid-related issues with inheritances is advance planning. When families know a loved one is receiving or may need Medicaid, their estate plan should reflect that reality.
Proper planning can involve:
- Structuring a will or trust to bypass direct inheritance
- Naming a special needs trust as a beneficiary instead of the individual
- Coordinating with all family members to ensure consistency across estate documents
At The Mundheim Firm, we help families build Medicaid-friendly estate plans that anticipate future challenges, reduce the risk of disqualification, and protect everyone’s interests before problems arise.
Protect Your Family’s Benefits Before It’s Too Late
Inheritances and Medicaid don’t have to be in conflict, but they do require careful planning, quick action, and experienced legal guidance. If you’re concerned about how an inheritance might affect your loved one’s Medicaid eligibility, don’t wait until benefits are at risk.
Contact The Mundheim Firm today for a compassionate and comprehensive review of your estate plan. We’ll help you protect your assets, preserve essential benefits, and ensure your family’s future is secure. Call us at 817-479-0076 or reach out via our online contact form to schedule your consultation.
