Medicaid law has technical demands such as proof of residence and requires one to have a social security number. There are also financial requirements that have strict income and asset limits.
Oftentimes, a one-time disbursement of $2,000 or more can be the reason that someone loses their eligibility for Medicaid. Exceptions may apply; however, settlements, monetary gifts and inheritances are all capable of causing someone to lose Medicaid.
Medicaid programs also sanction transfer penalties, meaning that gifting your assets to a family member or a friend will not protect your eligibility for Medicaid. Giving away assets can create penalty periods; however, this problem can be solved by protecting Medicaid eligibility by establishing a Special Needs Trust.
- Click here if you know how to protect Medicaid and are a seeking a Special Needs Trust document.
- Call (877) 766-5331 if you have heard about Special Needs Trusts but want to speak to a representative about questions you may have.
- Click here if you would like to read more about Special Needs Trusts.
A True Life Example
Ellie has lived alone since her divorce several years ago, and both of her adult children live out of state. She only receives a small pension and relies on Medicaid to meet her chronic medical needs. Because Medicaid requires that she have limited income and no more than $2,000 in countable assets, Ellie has no meaningful choice but to live a very difficult and compromised lifestyle. Ellie recently learned that she is about to receive a modest inheritance from an aunt’s estate. Understandably, this makes her hopeful because she will be able to pay off some debt and put away some savings for future needs. However, Ellie is soon disappointed when she learns that even this modest inheritance will cause her to lose her Medicaid because the inheritance will be a countable asset. In other words, the inheritance will cause Ellie to exceed the asset limit imposed by Medicaid.
What would otherwise be good news creates a quandary for Ellie. If she loses her Medicaid, she will be forced to pay privately for her chronic medical needs. This means her inheritance will be quickly dissipated because she will be forced to pay privately for her medical care. She will also be paying at significantly higher rates because she will not be able to pay at the lower rates negotiated between her State and her State’s Medicaid service providers. Ellie can reapply for Medicaid after her inheritance has been dissipated, but the application process can be difficult and time consuming. Even if Ellie can navigate the application process and begin receiving Medicaid again, she will find herself right back where she started with mounting debt and no savings for her future needs.
Eventually, Ellie solved her problem by making the decision to establish a Special Needs Trust. By establishing her Trust, Ellie is able maximize all of the resources available to her by preserving both her Medicaid and her inheritance. Because of her decision, she continues to receive the critical medical care she needs while also safe guarding her inheritance so it can be used for her current and future supplemental needs.
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