Inheritance Money & Medicaid Benefits

By Gail Ferguson Jones
You can set up a trust for an elderly relative without affecting her medicaid benefits.

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Medicaid benefits are tied to financial means and income, therefore the receipt of assets or cash as an inheritance disqualifies the beneficiary. Those wishing to improve the quality of life for a disabled relative or friend, however, may set up a trust as part of their last will and testament. This trust will not cause the loss of government medical benefits to the grantee.

Medicaid Eligibility

The medical expenses of those collecting disability Supplemental Security Income are covered by Medicaid, which goes to those with less than $1,000 a month in income and $14,000 in assets. Any inheritance exceeding those amounts must immediately be reported to the Social Security Administration and puts benefits in jeopardy unless the additional cash or assets are placed in a trust. If not protected, the inheritance must be used to cover expenses and depleted before benefits are restored.

Protected Trust Funds

Federal law allows the establishment of a "self-funded'' trust by the beneficiary, from which medical care and equipment not covered by Social Security or Medicaid can be paid. This fund is set up by the beneficiary and requires that any leftover funds go toward paying back the state upon that individual's death. The person bequeathing the inheritance can make similar arrangements in their will by establishing a "supplemental needs trust.''

Trust Requirements

Trusts can be set up for those over 18 years of age who can prove they are not physically or mentally able to work or support themselves for at least one year or until their death. If the inheritance results from the death of a spouse, it is considered part of joint assets or income and subject to benefit rules, which means it cannot be protected by a trust.

About the Author

A newsroom veteran since 1982, Gail Ferguson Jones has reported and edited for Dow Jones and "The Star-Ledger" in Newark, N.J., and has won first-place awards in deadline and spot-news reporting. Ferguson Jones is a Rutgers University graduate and completed a jounalism fellowship at the University of Missouri.

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