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Inheritances and Medicaid
It doesn’t take long after a family member enters a nursing home facility for a lifetime of savings to be depleted to pay for the costs of long-term care.
And, when assets are spent-down to $2,000, MediCAID can kick in and start paying the bill. But, once a MediCAID beneficiary spends down to $2,000, assets must stay below $2,000 or else, if they rise again to exceed $2,000, eligibility is lost.
This rule is important to remember for anyone with a Will that names a disabled heir who might currently be in, or about to be placed into, a long-term care nursing facility. Leaving an outright bequest to a disabled heir who is on, or about to be on, MediCAID may mean immediate loss of eligibility and use of the gifted assets to pay for expensive nursing home care.
BUT, if your Will names a disabled heir you do have an Option (#3 below) that allows a particularized bequest to be made to that loved one without worrying about whether the gift will be used to pay for nursing home expenses.
Your Options:
Option # 1. Leave the Will as is and take the risk assets are used for the disabled heir’s nursing home costs;
Option # 2. Amend the Will and eliminate the bequest;
Option # 3. Amend the Will and create a testamentary trust that will hold the bequest in trust for the benefit of the disabled heir for the remainder of the heir's lifetime (then to other designated heirs IF you wish). The trust must be created using specific language. The trust could be viewed as a source of supplemental funds that would otherwise not be available. You cannot name the disabled heir as a Trustee of such a trust and you could not give the disabled heir unlimited access to the trust funds, but the funds could be used for some specified needs. The provisions of such a trust would have to be quite restrcitive about how the funds could be used. For example, you would have to include a provision that states that the trust funds could not be used for Medical bills, but could be used for buying clothes and personal items that were needed, as well as paying for supplemental care items such as a nurse’s aide. The funds could spent for anything that will benefit the disabled heir, including prepaying a funeral, travel, dining out, clothes, television, DVD player, and paying off any debts. A qualified elder law attorney familiar with Medicaid laws of your state would probably know how the trust would have to be specifically worded;
Option 3 allows you to avoid the hard choice of disinheriting a loved one.
Remember that a trust such as that discribed in Option 3 should not be prohibitively expensive. It could cost as low as a few hundred dollars. Nor does such a trust require that it be funded with only large amounts of money. Making ten thousand ($10,000) dollars available for clothes, accessories, and other supplemental items for a disabled heir in a nursing home could make an otherwise difficult ordeal much more comfortable.
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