Q. My 86-year-old mother is in a nursing home and receives a Medi-Cal subsidy. We just learned that her brother died and left her $200,000 in his trust. Will the receipt of this inheritance bounce mom off of Medi-Cal? Is there anything we can do?
A. The answer to your first question is easy: yes, the receipt of that inheritance will put her over the resource ceiling and result in the termination of her Medi-Cal nursing home subsidy. If she is unmarried, that resource ceiling is a very modest $2,000.
As your second question, there may be things you can do. Here are some options:
1) Purchase A Prepaid Funeral Plan. If she has not already made her final arrangements, she can purchase a prepaid funeral contract or fund an irrevocable burial trust for herself and other members of her immediate family. Most mortuaries have forms available. Those funds will then be considered exempt and will not count toward her resource ceiling.
2) Pay Debts and Expenses: If Mom has any outstanding debts or expenses, she can pay them. Be sure to pay by check and retain full documentation.
3) Reform Brother’s Trust? In some cases, it may be possible to reform her brother’s trust by court order during trust administration, so that the bequest would bypass your mother and, instead, go into a Special Needs Trust (“SNT”) for her benefit. The SNT would then be managed by a trustee, which could be a family member or a professional trustee appointed by the court. If properly set up and administered, the funds distributed to the SNT would then not count against her $2,000 Medi-Cal resource ceiling. Instead, they could be used to pay for things that Medi-Cal does not cover, such as a companion to spend time with her or even to supplement healthcare expenses not paid by Medi-Cal.
4) Join Pooled SNT: If it is not possible to reform her brother’s trust, consider joining a pooled SNT. These are SNT’s set up and managed by nonprofit organizations, whereby all of the funds are invested and professionally managed as a group, but separate accounts are maintained for each individual beneficiary. Distributions from the pooled SNT could likewise be used to pay for things that Medi-Cal does not cover. The drawback is that funds remaining in the pooled account after Mom’s death must first be used to reimburse the state to the extent of Medi-Cal benefits paid out for her, and the excess, if any, may remain in the fund for its ongoing nonprofit purposes.
5) Make Gifts? If mom has full capacity to consent to gifts, or if she has in place a Durable Power Of Attorney which has adequate gifting powers (unfortunately, most do not), consideration might be given to a very carefully designed plan of divestment in favor of children or other family members. CAUTION: gifts are frowned upon by Medi-Cal, and any gifting plan should be designed and supervised by an Elder Law attorney with expertise in this area. If gifts are not handled properly, they may result in the termination of Mom’s Medi-Cal benefits.
As to all of the options, timing is very important, and it is usually necessary to design the plan before the inheritance is actually received so that it can be fully implemented in the month of receipt. To avoid running afoul of the Medi-Cal rules, obtaining expert advice is essential.