Mom has been on Medicaid for 2 years. She has been named in a will of about $25,000.00. How should I report this to Medicaid?

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How should the Trustee of the person pay this to my mother or Medicaid.

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When you say your Mother was "named in a will" can I assume that it is a will of a person who has passed away? (If the person who wrote the will is still living and competent, they could change their will).

If "yes" (the person has passed away) you will have to report to Medicaid that your Mother has received a gift. Check the Medicaid rules in your state, but you will probably find that disclaiming (declining to accept) the bequest from the will counts are a disqualifying transfer.

If there is no spouse at home, and the rules say your Mother cannot have more than $2,000 in the bank, the money will have to be used for a non-countable asset (such as pre paid funeral, burial account) or spent down for her care.

Also, consider setting the money aside in a Pooled Trust, to supplement the care that the nursing home is providing. 42 U.S. Code § 1396p(d)(4)(C) allows a Medicaid beneficiary to put assets into a Pooled Trust established and managed by a non-profit association, with a separate account maintained for each beneficiary of the trust, solely for the benefit of individual, and as long as any money remaining in the beneficiary’s account upon the death of the beneficiary are paid to the State from such remaining amounts in the account an amount equal to the total amount of medical assistance paid on behalf of the beneficiary.

If you consult with an elder law attorney near you, you can get complete advice on non countable assets, pooled trust accounts, and any other options that are available to help your mother.
In Wisconsin, you'd contact the Wisconsin Department of Health Services to ask how the bequest should be reported.
If the person doing the will, is still alive see if they or their POA could do a codicil naming you or a grandkid (better as less tax exposure)

But If they have died, depending on your state, the executor could put off probate. Like for TXyou can take 4 years to do probate. Whether or not the executor would do this has a lot of factors, but you could ask. It may be that executor is just not in a hurry to begin with so could put it off if allowed.

Sadly 25k isn't that much money. Depending on their situation you could spend down in a month or two easilt. If they don't have a prepaid funeral & burial, you could spent 10k on that. If they need new hearing aid, eyeglasses, specialized chair or walker, they could spend down on that. If they need dental work done, you could easily spend all the money on dental. If they still have their home, they could spend on house items.

To me 25k isn't worth the effort to set up a pooled trust. 250K maybe, 25K no. I'd ask just what the agent of the non profit association just gets paid in fees and commissions on the pool. & what happens to disburse the trust to the state if mom dies a month after pool is set up and what fees are coming out of it to pay for settlement on the trust. You want these answers in writing too.

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