What Happens When a Medicaid Long Term Care Beneficiary Receives an Inheritance?

Summary
Medicaid Long Term Care beneficiaries have must have income and assets below specific financial limits, and receiving an inheritance could push them beyond those limits depending on the amount and one’s state of residence. This might lead to a gap in coverage if the beneficiary doesn’t take the necessary steps, which are detailed below.

Notifying Your State Medicaid Agency

The first thing Medicaid Long Term Care beneficiaries need to do after receiving an inheritance is notify their state Medicaid agency. In most states, the notification must take place within 10 days of the beneficiary receiving the inheritance. If the beneficiary isn’t capable of notifying the state, a family member or representative can do it for them.

You can find the contact information for your state by using the “Contact Your State Medicaid Agency” tool on this official Medicaid.gov webpage.

If the state is not notified, and the inheritance would have made the Medicaid Long Term Care beneficiary ineligible, the beneficiary will have to reimburse the state for their long term care expenses during what should have been their period of ineligibility.

Does the Inheritance Push One Over Financial Limits?

After notifying the state, Medicaid Long Term Care beneficiaries need to figure out if the inheritance will push them beyond either of the two financial limits – the asset limit or the income limit. To make that calculation, they have to know the amount of the inheritance and their financial eligibility limits. In most states in 2025, the individual asset limit for Medicaid Long Term Care is $2,000 in the individual income limit is $2,901/month. These limits can vary by state, marital status and type of Medicaid Long Term Care – Nursing Home Medicaid, Home and Community Based Services (HCBS) Waivers and Aged, Blind and Disabled (ABD) Medicaid. In most states in 2025,

Beneficiaries need to know both limits because an inheritance can count as both income and asset: In the month when the inheritance was received, it’s considered income. After that first month, what is left of the inheritance will be considered an asset.

Getting Back Under the Limits and Regaining Eligibility

Since Medicaid Long Term Care’s financial limits are relatively low, chances are good an inheritance will push you past the income limit in the month it’s received. This will make you ineligible for your Medicaid coverage, but there are ways you can you spend that inheritance to get below the income limit and regain your eligibility. If you can do it by the end of the month you received the inheritance, your Medicaid Long Term Care coverage will resume in the following month.

If you can’t spend all of the inheritance in the month it was received, whatever remains will be counted as assets the following month. That may push you over the asset limit, which would make you ineligible for Medicaid, but there are also ways you can spend that excess money to get you below the asset limit.

There are several ways you can spend your inheritance to get below the financial limits and regain eligibility, but they must adhere to Medicaid rules. You are allowed to “spend down” on any healthcare costs, like the cost of a nursing home. You can make home modifications, buy new household appliances or furniture, or pay off debt. What you can’t do is spend their inheritance on someone else (other than your spouse) or simply give it away to get below the financial limits. This violates Medicaid’s Look-Back Period rules.

Other ways you could spend your inheritance to reduce your assets include purchasing a Medicaid Compliant Annuity or an Irrevocable Funeral Trust. If the circumstances were right, you could knowingly break Medicaid rules and plan to pay for your long term care with the inheritance until it runs out and you can regain eligibility.

These strategies are complicated, as are Medicaid’s rules, so we recommend consulting with a professional like a Certified Medicaid Planner or an Elder Law Attorney before attempting any of them on your own.

Example: Inheritance Spend Down