Can you inherit money while on Medicaid?
Asked by: Josie Yost | Last update: September 20, 2025Score: 4.7/5 (37 votes)
What happens if you receive an inheritance while on Medicaid?
California stands apart from the other states. In CA, Medicaid (Medi-Cal) recipients can gift inheritance, which is considered “income”, the month in which it is received. Furthermore, Medi-Cal recipients have no asset limit, and therefore, can have unlimited assets and still be eligible for long-term care benefits.
How to protect an inheritance from Medicaid?
Special needs trusts help you to manage inheritance money so it won't count toward income-based benefits like Medicaid and Supplemental Security Income (SSI). The money in special needs trusts must pay for expenses your government benefits don't cover.
What benefits are not affected by inheritance?
However, receiving an inheritance won't affect Social Security and SSDI benefits. SSI is a federal program that pays benefits to U.S. citizens who are over age 65, blind or disabled and who have limited income and resources.
What happens if you inherit money while on Medicare?
Inheriting money or receiving any other windfall, such as a lottery payout, does not bar you in any way from receiving Medicare benefits. An inheritance won't prevent you from receiving Social Security retirement benefits or Social Security disability benefits either.
What to do if someone on Medicaid inherits money or receives money
What benefits are affected by inheritance?
Council Tax Reduction
When someone receives an inheritance, it can affect their eligibility for these benefits, as the inheritance is considered part of their capital. If your total savings (including the inheritance) exceed certain thresholds, you may lose eligibility for means-tested benefits.
Is inherited money reported as income?
If you received a gift or inheritance, do not include it in your income. However, if the gift or inheritance later produces income, you will need to pay tax on that income. Example: You inherit and deposit cash that earns interest income. Include only the interest earned in your gross income, not the inherited cash.
Does inheritance affect government assistance?
There is no limit to the amount of assets that may be held in an SNT and those assets are not countable for purposes of determining your eligibility for government benefits.
What can cause you to lose your inheritance?
- The will is dated and does not reflect the decedent's wishes;
- Circumstances have changed since the will was made (i.e. a remarriage or the birth of a child);
- The decedent expressed different wishes verbally prior to death;
- The decedent leaves property to someone other than their spouse;
Can you lose your Social Security benefits if you inherit money?
Therefore, inheritances do not impact eligibility, and no reporting requirements exist for inheritances or assets received. Before assuming an inheritance will forfeit your benefits, check which program you receive—SSI or SSDI.
How often does Medicaid check your bank account?
Medicaid agencies can check your account balances for bank accounts at any financial institution you've used in the past five years. They will check when you submit an application and on an annual basis, but checks can occur at any time.
How much can Medicaid take from an estate?
A Medicaid agency cannot collect more from one's estate than the amount in which it paid. For example, if the state paid $153,000, but one's estate is worth $300,000, Medicaid can only take $153,000. With MERP, all states are required to seek recovery from the deceased Medicaid recipient's “probate estate”.
How can I stop inheritance from affecting benefits?
If you're writing your will and don't want the inheritance you leave somebody to affect their benefits, it could be worth seeking professional advice. They might suggest you set up a trust, especially if the person you're leaving money or assets to is vulnerable.
Can a nursing home take your inheritance?
No one “takes” assets from the patient; the nursing home simply requires payment for its services if the patient intends to reside in the nursing home. The notion of assets being seized by the government or a nursing home is only one of several misconceptions about paying for long term care.
Can Medicaid go after life estate?
Medicaid Complications
With a life estate, giving away an interest in the property could disqualify you from receiving assistance from Medicaid, if you require long-term care within five years of the transfer.
How do I keep my SSI and inheritance money?
- Spend down assets. For smaller inheritances, consider spending on essentials to get below the resource limit within a month. ...
- Establish an ABLE account. ...
- Evaluate lifetime gifting options. ...
- Consider a special needs trust.
What are the six worst assets to inherit?
What is inheritance hijacking?
Due to community property laws, spouses of deceased individuals are entitled to part of the estate under California law. Unscrupulous individuals may attempt to marry someone under false pretenses to steal an inheritance from someone else. They may marry a wealthy individual to benefit from their passing financially.
Is it better to inherit cash or property?
“Cash is king when it comes to leaving an inheritance,” said Carbone. “It's the simplest asset to deal with in terms of a transfer.”
Will I lose my Medicaid if I inherit money?
An inheritance will be counted as income in the month it is received. Therefore, if you receive an inheritance and the amount puts you over the income limits, you will be ineligible for Medicaid benefits for at least that month.
What happens if you inherit a house while on section 8?
So, if a beneficiary received real property as an inheritance, the value of the real property is not considered, but the actual income or the imputed income from renting the real property is considered.
Does the IRS know when you inherit money?
In general, any inheritance you receive does not need to be reported to the IRS. You typically don't need to report inheritance money to the IRS because inheritances aren't considered taxable income by the federal government. That said, earnings made off of the inheritance may need to be reported.
What is the most you can inherit without paying taxes?
Many people worry about the estate tax affecting the inheritance they pass along to their children, but it's not a reality most people will face. In 2025, the first $13,990,000 of an estate is exempt from federal estate taxes, up from $13,610,000 in 2024. Estate taxes are based on the size of the estate.
What happens when you inherit money?
The Executor must submit the Will and other important documents to the probate court, and then pay any outstanding bills and taxes. Once that's done, you can expect to receive a disbursement of financial assets and transfer of ownership of any tangible assets.