Remember how great it was to pull this Community Chest card in Monopoly: You Inherit $100! Well receiving an inheritance can be a bit sticky when you're receiving Medicaid in Pennsylvania. Receiving an inheritance, a lump sum of money or property, can significantly impact your Medicaid eligibility. Let’s break down the complexities and see how to navigate this potential bump in the road.
Medicaid in Pennsylvania: A Needs-Based Program
First things first: Medicaid in Pennsylvania is designed to provide healthcare or skilled nursing care coverage to individuals who can't afford it otherwise. As such, it is a needs-based program – meaning if you have assets valued over a certain amount, you will not be eligible for Medicaid. A sudden influx of assets, like an inheritance, could put you over the limit of assets for purpose of Medicaid eligibility.
The Asset Limit: The Critical Threshold
Pennsylvania Medicaid has strict asset limits. While these limits can vary slightly depending on the specific Medicaid program you are enrolled in (e.g., Medical Assistance for individuals aged 65 or older, or those who are blind or disabled), the core principle remains: you can't have too much money in the bank. Generally, for an individual, this limit is relatively low, often a few thousand dollars. For married couples, the limit is higher, but still significant.
What Happens When You Inherit?
When you receive an inheritance, the cash, stocks, bonds, real estate, or other assets you inherit are considered available resources for Medicaid purposes. This means they count towards the asset limit. If your inheritance pushes you above that limit, you risk losing your Medicaid benefits. You’ll be ineligible until you spend down the inheritance below the applicable limit. Then you’ll have to go through the Medicaid application process all over again. That’s a hurdle that for some, especially those who are disabled or elderly with nobody to help, that can be insurmountable.
Reporting the Inheritance is Required under the Law
The absolute most important thing you can do when you receive an inheritance while on Medicaid is to report it immediately to your caseworker or the Department of Human Services (DHS). Failure to report it can be considered fraud and lead to serious penalties, including the repayment of benefits received while ineligible.
If You're About to Inherit. What Are Your Options?
Receiving an inheritance doesn't automatically mean you'll lose your Medicaid coverage at all or forever. You usually have a significant amount of time between the date that you are informed you are eligible for an inheritance and the date you actually receive the inheritance. There are strategies you can explore to protect your eligibility while still benefiting from the inheritance. You can use that time period to do some planning. Here are some common approaches:
Disclaimer:
Persons eligible for an inheritance can “disclaim” their right to receive the inheritance. This might seem like the easiest solution to your problem but it will not work. Medicaid rules require you to make your assets available if you can. If you refuse an asset, or even pass up an opportunity to obtain an asset, there may be a penalty.
Spend Down:
This involves legally spending the inheritance on allowable expenses within a reasonable timeframe. Allowable expenses might include paying down debt, making necessary home repairs (especially those that increase accessibility), purchasing a vehicle for transportation, or pre-paying funeral expenses. IMPORTANT: You need to document everything meticulously and ensure the spending is in line with Medicaid regulations. The timing of the spend down can also reduce or possibly eliminate any period of ineligibility for Medicaid benefits. Donating to charity is generally not a permissible spend-down.
Work with Executor or Trustee:
The person leaving you an inheritance may have included provisions in their Will or Trust that might include provisions protecting the inheritance for beneficiaries who received Medicaid benefits. It might be helpful to open a dialogue with the executor, trustee or the attorney administering the estate to see what options might be available in the decedent’s estate planning documents.
PA ABLE Account:
These accounts are for people with a qualifying disability that began before age 26. If eligible, you could pay the inheritance into an ABLE account and use it to pay for basic living expenses without jeopardizing eligibility for Medicaid and other government benefits.
Special Needs Trust (SNT):
If you are disabled, a Special Needs Trust (also known as a Supplemental Needs Trust) can be a valuable tool. This allows you to hold assets (including inheritance) without impacting your Medicaid eligibility. SNTs are complex and require careful drafting by an experienced attorney.
Get Professional Help: Don't Go It Alone!
Navigating Medicaid regulations is very complicated and the options available to you depend on a variety of factors. Every situation is unique, and the rules are constantly evolving.
If you are receiving Medicaid in Pennsylvania and expect to receive an inheritance, seek legal counsel immediately. The experienced elder law attorneys at Fiffik Law Group can help you understand your options, develop a strategy to protect your Medicaid eligibility, and ensure you are compliant with all applicable laws and regulations. We can help you navigate this challenging situation and find the best solution for your specific needs.