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To most people, the extra money that comes along with an inheritance is welcomed. However, if you are on Medicaid, which has strict income and resource limits, your inheritance could deem you ineligible to receive coverage.

Rather than worry, it’s important to be proactive. If you are expecting an inheritance, it’s essential to know what to do so that you don’t lose your Medicaid while still putting the money to good use.

Understanding Medicaid limits
Medicaid has an asset limit. For a single person in Ohio in 2021 that limit is only $2,000, for a spouse who is in the community, that limit is $130,380.  If the inheritance will put you over this limit, it is important to have a plan in place for how to spend your money, otherwise, you (or your spouse in the nursing home) will be ineligible for Medicaid every month you are over the asset limit.

Spend that money
To recover your Medicaid eligibility as quickly as possible, it’s best to spend the inheritance money down to the asset limits within the month you receive it. However, this money must be spent properly to ensure coverage will continue the next month. Here are some tips:

  • Make your healthcare payment: Because Medicaid won’t cover the month of your inheritance, make sure to pay the nursing home or home/community-based services bill (at the Medicaid rate) with your inheritance. This may seem obvious, but it’s an important first step that shouldn’t be forgotten.
  • Resolve debts: The inheritance money is a great opportunity to pay off or lower any debts you may have, whether that’s your home mortgage, credit cards or automobile or other loans.
  • Home improvements: If you’ve been putting off a home repair or looking to modify it to improve access and safety or add on, using inheritance money could be a great way to do it.
  • Vehicle repairs: Battery replacements, engine tune-ups and new tires are also great spends. So it selling an existing car and purchasing a new one.
  • Irrevocable trusts: Eligible inheritance can also be applied to an irrevocable trusts to cover funeral expenses (typically up to $150,000). A trust can also be set up to care for a spouse or child with special needs.
  • Life care agreement: A life or personal care agreement can be made between an elderly Medicaid recipient and a relative or close friend to allow the care recipient to spend down their excess assets while receiving needed care.
  • Annuities: A community spouse can purchase an annuity, known as a “Medicaid Compliant Annuity” which is a lump sum of cash converted into a monthly income stream.   There are many requirements that need to be met to for this Annuity to be approved by Medicaid, so it is imperative you seek legal assistance before you take any action with this.

Generally, gifting inheritance to others can result in Medicaid ineligibility or a penalty period.

Always report an inheritance to Medicaid
Whether you have spent down your assets to the Medicaid limits during the month or not, you are legally obligated to report the inheritance and how it was used to Ohio’s Medicaid agency. If you don’t, you’ll be required to pay back Medicaid for any services or benefits provided during the period of ineligibility.

Seek help
If the inheritance is too large to spend in one month, seek an attorney for other options to ensure the money is protected while avoiding losing your Medicaid coverage.

Careful planning and the right legal advice will ensure your inheritance doesn’t turn into a negative.

Still have questions? Contact me today to set up a time to chat.

Please be advised that Christina M. Hronek is licensed to practice in the State of Ohio only and the information provided in this article is based upon Ohio law. This article is for informational purposes only and does not constitute legal advice.

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