Follow
Share

My mother, who has advanced dementia, has been in a long-term nursing home for about a year. My father has been spending down his money...and we were recently approved for Medicaid. This is obviously a positive development, however another issue just arose. My uncle recently passed away and his two siblings (my father and aunt) are the only beneficiaries to his life insurance policy and 401(k). I am worried that if my father takes his share of the inheritance, this will disqualify him from Medicaid. I would hate to see this because my dad has already given practically all of his savings to the nursing home. Can the 401(k) be rolled over into an IRA account that is exempt from Medicaid? And can the life insurance somehow be gifted to my aunt or my dad's children? I appreciate all responses.

This question has been closed for answers. Ask a New Question.
Guestshoppe, thank you for that detailed response. It is very helpful. My father is the executor of the will, and my uncle passed away several months ago, so the money is still sitting in whatever account his employer has it. Now that my mom is on Medicaid, I think I am going to seek the advice of another elder care lawyer in terms of what to do with the 401(k) and life insurance policy. The Single Premium Immediate Annuity sounds like it may be a good option.
Helpful Answer (0)
Report

Guestshoppe is spot on in that dad has to take the $.

You know the whole situation for Community Spouse & Medicaid are quite complex and different than for an individual on Medicaid. I'd be concerned that dad may have already spent down more than he needed to. Most states have it so the the CS is allowed 119K in exempt liquid assets (like savings) plus their home and a car. His income should not enter the equation for mom's Medicaid eligibility. It's easy for those who are CS to spend-down more than they need to as their focus is all about caregiving and day-to-day issues and there flat isn't the time for finding ways to be creative with assets or they are very elderly themselves so no real point in doing so. CS creative is not a DIY imo. That's what a solid elder law atty is important. I'd suggest you get one that is NAELA as couples stuff is way more complex.

One thing that seems to work well for this situation is a SPIA - SIngle premium immediate annuity. Now personally I hate hate hate annuities as they are often sold with outrageous commission structure with less that useful terms to fearful, gullible elderly. But a Medicaid compliant SPIA is a very specialized insurance product. Say dad with the inheritance now has 200K. CS asset exemption is 119K so what he does is move the 81k into a SPIA and it pays him income over time. His income doesn't matter per se for Medicaid. If dad lives a long time or is somewhat on the younger side right now, he could well outlive the entire SPIA. It has to be Medicaid compliant which means its speciality underwriting. So not an annuity sold by his old insurance agent or FA. Really a NAELA atty will have FA's they work with to get one done.

What might be helpful is to speak with the executor to see just when the estate distribution will set to be done. The executor could wait to do this - really as one who has been an executor now 3 time, unless there is pre$$ing need (like a property is going to be foreclosed on) to close out probate, executor could wait to do the distribution checks. So dad could have time to get all in place working with his atty. , so that the inheritance is paid and them placed into SPIA, whatever within a month so that his asset profile really doesn't change as far as Medicaid is concerned. Also the will be paperwork to accompany the distribution and usually heirs have to submit the paperwork before distribution happens. So either way (executor delays or dad delays) there is a window to get something in place. Good luck!
Helpful Answer (3)
Report

An attorney can help figure out who to claim the inheritance and put into an account for your Dad. Having spouse outside Nursing home makes any assets fair game for Medicaid. My father in law and his wife facing same thing. Lawyer will have answers.
Helpful Answer (0)
Report

Thank you for the response Guesthopadmin. We are in Pennsylvania. My uncle was single so there is no divorce attorney or spouse involved here. It is just the two beneficiaries. You are right, we should consult an attorney as I know it can be tricky. I just wanted to see if I could get an idea of what to do. Certainly not trying to be greedy or beat the system, its just that my dad has already paid so much to the nursing home, and I would hate to see him lose this inheritance as well.
Helpful Answer (0)
Report

At this point, you need a lawyer involved to make sure that you help your father navigate this. Some states won't let you disclaim an inheritance in order to keep medicaid - they treat it like gifting. If he gifts money to your aunt or your dad's children (which I guess includes YOU), it will definitely incur a transfer penalty for Medicaid. There is not protection for inheritance in its entirety. It will be used for your father's care in some way, shape or form - Medicaid is in place to cover expenses that are not able to be paid for by a person's private assets. Please make sure you get good legal advice on best way to do it. IRA accounts are not exempt from Medicaid and the asset increase will disqualify father if he is above state limits. You need a lawyer experienced in Medicaid for your state, not relative's divorce attorney. Complex especially with a spouse.
Helpful Answer (1)
Report

This question has been closed for answers. Ask a New Question.