Medicaid Rules About Inheritance Without a Trust

When a person needs long-term custodial care and seeks it in a nursing home, assisted living facility or within her home, the patient is usually responsible for the costs. Government-run Medicare and private health insurance providers do not pay for long-term care, except in the case of private insurance policies designed specifically for that purpose. Patients qualify for Medicaid benefits if they are blind or otherwise disabled, or over 65, and meet Medicaid rules about inheritance without a trust and other financial assets.

Countable Resources

• Depending on the Medicaid rules of each state, a person's assets must fall below a certain amount, called a threshold, to be eligible for benefits. Assets such as bank accounts jointly owned with a spouse, jointly owned property, property sales, and inheritance as a lump sum without a trust are considered countable resources--i.e., income. If the total of those amounts exceeds the threshold, the person's application will be denied or his Medicaid benefits will be discontinued.

Assets Transfer

• The person cannot transfer assets, such as an inheritance without a trust, to anyone else to become eligible for Medicaid nursing home benefits. Medicaid reviews the person's records for a "look-back period" of five years to detect any transfers of inheritance. If Medicaid finds that a transfer occurred, the person will lose eligibility for benefits for a certain time as a penalty, according to the Supplemental Needs Trust Organization. The penalty period varies based on the value of property sold for less than market value, or on the value of the money received.

Spending Down

• Many people try to "spend down" assets, including an inheritance without a trust, to become eligible for Medicaid benefits. A trust is designed to keep an inheritance from being a countable asset, and thus can help establish eligibility for long-term care assistance under Medicaid.