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Estate Planning when a Loved One Receives Medicaid

Posted on : May 30, 2017, By:  Christopher Hildebrand

Estate Planning when a Loved One Receives Medicaid

Everyone should have an estate plan – a will, health care directive, power of attorney, and for some people a trust. But if you have a loved one (especially a spouse or child) who receives Medicaid, it’s especially true that you should have an estate plan.  That is because there are some special considerations when you want to leave an inheritance to a person on Medicaid.

For many Medicaid programs, there is an asset limit.  (The asset limit does not apply to adults who receive Medicaid under the Affordable Care Act, but does apply to many people with disabilities, children, and people in nursing homes who receive Medicaid).  For an individual, that asset limit is usually between $2,000 and $4,000.  That means that if you possess assets that exceed that limit, you lose your Medicaid coverage.

Estate Planning when a Loved One Receives Medicaid | Medical Care and Illness

As New Jersey elder care attorneys, we frequently work with families where a member receives Medicaid.  One common situation is a married couple, in which one spouse lives in a nursing home or assisted living facility, and the other is healthy and lives in the community.  In this situation, often assets should be titled solely in the name of the community spouse – house, car, bank account, etc.  Likewise, a new will often be drawn for the community spouse that leaves the minimum amount under New Jersey law – called the elective share – to the spouse in the nursing home.  

That is because when the community spouse dies, the community spouse would want as much property as possible to go to other family members.  If that property goes to the spouse in the nursing home, it would disqualify the spouse from Medicaid, and the property would have to be used to pay for long-term care costs.  Instead, presumably both spouses would want that property to go to other family members, and for Medicaid to continue paying long-term care costs.

That’s not true for every family, and we, of course, cannot give advice without knowing your situation.  But for many families where one spouse is on Medicaid in a nursing home and the other is not, re-titling assets and crafting a new estate plan can save significant assets that otherwise would be lost to long-term care costs.

Estate Planning when a Loved One Receives Medicaid | SSI and Medicaid Benefits

Another common situation is parents who want to do estate planning, and have a child born with a developmental disability, such as intellectual impairment or autism spectrum disorder.  Once the child turns 18, the parents plan to apply for Supplemental Security Income (SSI) and Medicaid.  Or if the child is already over 18, the child may already be receiving these government disability benefits.  

If the parents pass away and leave an inheritance for the child, the inheritance will push the child over the Medicaid and SSI asset limits, and the child will lose her benefits.  Instead, a better approach is often to the leave the inheritance through a special needs trust.  
In this arrangement, the inheritance is held in trust under the control of a trustee, who manages the trust assets and can spend them to benefit the child with disabilities.  If the trust is drafted and administered correctly, trust assets can be spent on the child with disabilities, without that child losing her Medicaid and SSI.

There are a variety of other considerations regarding Medicaid and estate planning, including estate recovery by the government.  But hopefully, the above examples illustrate some of the concerns that go into estate planning where a loved one receives Medicaid, and demonstrate why anyone who has a loved one who receives Medicaid should review their estate plan.

Contact our experienced Arizona Estate Planning Attorneys at (480)947-4339.

Thank you to our friends and contributors from FriedmanLaw for their insight into estate planning and Medicaid matters.

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