How Does Inheritance Affect Medicaid Benefits?

An inheritance is a windfall.  Any windfall will jeopardize need-based benefits, such as Medicaid. Once the bell has been rung, it cannot be unrung in the eyes of the Louisiana Department of Health, which administered the Medicaid program in Louisiana.  As such, care must be taken to avoid unintentionally disqualifying an heir or legatee from Medicaid.

Medicaid Eligibility

Medicaid is a need based benefit.  However, Medicare and Social Security Disability Income (“SSDI”) are not need-based. As such, an inheritance will not affect Medicare benefits, which is an entitlement.  Likewise, an inheritance will not affect disability benefits that are are not “need based.”

Medicaid eligibility is based on income and assets tests.  The criteria for eligibility varies from state to state.  In Louisiana, an individual cannot have more than $2,000 of “countable” assets, or $3,000 for a married couple.  If an inheritance puts you over the limit, it can disqualify you for Medicaid.

Failing to Plan

As specialists in Louisiana Probate and Succession Administration, we see a few common scenarios that can unintentionally disqualify a person from Medicaid.

Intestate Succession

First, the failure to plan will almost certainly blow Medicaid benefits of an heir.  When someone dies without a valid Last Will and Testament or Living Trust, an intestate succession is required in Louisiana.  Intestate heirs include children, grandchildren, siblings, parents, and a spouse depending on the characterization of the property as separate or community property.  If a person’s intestate portion is more than Medicaid asset limits ($2,000 for individuals), it may disqualify the heir from Medicaid.

Forced Heirship

Often a person who is qualified for Medicaid may be considered a forced heir under Louisiana law.  A forced heir is someone under the age of 24, or someone that has an inherited mental or physical condition that may (or may not!) render the person unable to care for themselves at some point in the future.  A forced heir is entitled to a percentage of the estate, referred to as the forced portion.  CLICK HERE to learn more about forced heirship in Louisiana.  In any event, if the forced portion is not set aside in a way that will preserve benefits,  the inheritance may disqualify the forced heir from Medicaid, or other need-based benefits.

Bad Planning

When someone dies with a valid Last Will and Testament leaving assets outright (free of trust) to a person who is Medicaid qualified, the inheritance may disqualify the person receiving the inheritance from Medicaid.   This unintended consequence could be avoided by leaving assets in special needs trust specifically designed to preserve need-based benefits, such as Medicaid. An outright bequest to a person who is Medicaid qualified is never a good idea.

Le Mort Saisit Le Vif

The heart of the problem in Louisiana is the concept of seizen.  The French phrase “Le Mort Saisit Le Vif” means “the dead seizes the living.” This means that in Louisiana, an heir or legatee is deemed to be seized of their interest at the moment of death.  So it’s not possible to avoid the consequence of an unintended or unexpected inheritance.  Louisiana Medicaid deems a refusal to accept an inheritance (that seized from the moment of death) as a gift that will likewise trigger disqualification and a period of ineligibility to receive benefits from Medicaid.

At the bottom, whenever a person who is qualified for Medicaid receives an unexpected or unintended inheritance, the assets received must be be spent down before the recipient can requalify for Medicaid.  Medicaid doesn’t “take” an inheritance.  Rather, a spenddown usually requires a Medicaid recipient to simply private pay for medical benefits until the inheritance has been exhausted.

Reach out to a Louisiana Probate Lawyer that Specializes in Estate Planning Today

Probate is challenging process, so you need to anticipate difficulties, including the preservation of important need-based benefits for a loved one.  Contacting a Louisiana succession lawyer can make it easier for your loved ones. A qualified succession attorney can help your loved ones navigate through the legal processes and help preserve need-based benefits, such as Medicaid.  The right attorney can also help you complete and file the right legal paperwork. 

If you’re looking for a probate lawyer to help you with a Louisiana succession, or are simply unsure about what a succession in Louisiana entails, you can always reach out to Theus Law Offices for more information. Contact us today, and see how a Louisiana probate can help you today – and your family tomorrow.