Medi-Cal and Inheritances–Who Should Receive the Money?

Dear Mr. Miller:

My Dad is in a skilled nursing facility in Northern California.  My Mom is fine.  They don’t have much and are eligible for Medi-Cal and are about to apply.  My Dad’s s brother wants to leave him a sizable inheritance (over $600,000).  The brother is older and beginning to fail health wise.

No one seems to be worried about this inheritance and its effect on Medi-Cal.  I checked online and the limit in 2021 for how much they can have is about $133,000 ($2000 for Dad and the rest for Mom).  Isn’t that inheritance going to get them kicked off Medi-Cal?

Son Keeping an Eye on the Finances

Resource Allowance and Disclaimer
Inheritance by Spouse after Qualification
Problems with the Children Inheriting
Inheritance by QMap Trust
Conclusion

Dear Finances:

Resource Allowance and Disclaimer:  It’s good someone in the family is keeping an eye on things. You are correct about the $133,000 which is called the resource allowance. If your Dad inherits that will put him over the resource allowance and he will lose eligibility, at least, until he re-qualifies.  Your Dad would not be able to disclaim (i.e. renounce) the inheritance for Medi-Cal purposes.  So he would have to spend the money down, go on gift giving campaigns, etc.

Inheritance by Spouse after Qualification:  But the inheritance could be to someone/something else.   It could be to your Mom, and then everything changes.  But, timing is everything.  If your Mom inherits in the month after your Dad is determined to be eligible (or later in time), those assets don’t “count” against your Dad.  In other words, after your Dad qualifies, your Mom can win the California lottery and it won’t matter—at least as to your Dad.  But here’s the catch.  What if your Mom has a stroke and needs long term skilled nursing?  The resource allowance for a couple both on Medi-Cal is $3000.  So with the $600,000 inheritance in her pocket, she would not be eligible.  And, again, they would be back to spending down, going on gift giving campaigns, etc.

Problems with the Children Inheriting:  But here is an alternative.  If the brother is ok with the kids controlling the inheritance and using it for your Mom’s benefit, he could just leave it to the kids.  The problem is that people sometimes die “out of order,” get sued, get divorced, go bankrupt, etc.  Assuming that you have one sibling and your sibling dies, then one-half of the fund for your Mom is now tied up in probate (or a divorce, or bankruptcy, or whatever else is on the laundry list of evils that can take place occurs).

Inheritance by QMap Trust: Typically, the better approach is to use a QMap Trust to inherit.  This type of trust would allow you and your brother to be the beneficiaries but keep everything under one management until your Mom and Dad pass.  Although there is no legal requirement that they do so, the children could use the proceeds for your Mom’s benefit if done correctly.  A bankruptcy, divorce, or death of your brother should not interfere with the money being available for your Mom.

Conclusion:  Give us a call at 760-436-8832 so we can discuss options specific to your parents’ circumstances, in detail.  There is no charge for the initial assessment and usually no charge for the initial consultation.