If you inherit money and do not report it, you will be required to pay Medicaid back for the services and benefits that were provided during any period you would have otherwise been ineligible. When a Medicaid recipient receives an inheritance, it is counted as income in the month that it is received.
Although an inheritance won't affect your Medicare benefits, it could raise your premiums in the short-term. Medicare is a federal health insurance program for people aged 65 or older, some younger people with disabilities, or people with end-stage renal disease (ESRD).
Set Up a Trust
One of the most effective ways to protect your benefits is to have your inheritance placed in a discretionary trust. This structure ensures that the assets are not directly accessible to you, which can help shield the inheritance from means-testing.
What to Do When Clients Receive an Inheritance While on Medicaid. While it may seem like an easy solution to simply refuse the inheritance, disclaiming assets is often treated as a divestment for Medicaid purposes and will result in a penalty period.
You disclaim the assets within nine months of the death of the person you inherited them from. (There's an exception for minor beneficiaries; they have until nine months after they reach the age of majority to disclaim.) You receive no benefits from the proceeds of the assets you're disclaiming.
However, receiving an inheritance won't affect Social Security and SSDI benefits. SSI is a federal program that pays benefits to U.S. citizens who are over age 65, blind or disabled and who have limited income and resources.
Your beneficiaries (the people who inherit your estate) do not normally pay tax on things they inherit. They may have related taxes to pay, for example if they get rental income from a house left to them in a will.
Therefore, inheritances do not impact eligibility, and no reporting requirements exist for inheritances or assets received. Before assuming an inheritance will forfeit your benefits, check which program you receive—SSI or SSDI.
Other states, such as California and Texas, prohibit Estate Recovery after the surviving spouse dies. The only exception is if the surviving spouse was also a Medicaid recipient.
The state of California has made it easier for Californians to apply for help paying Medicare costs. On January 1, 2024, the asset test to qualify for a Medicare Savings Program was eliminated. This means individuals can have any amount of assets and still qualify for a Medicare Savings Program.
It can be considered property and needs to meet spent down requirements. Eff July, 2022 property limit for 1 person is 130,000 in California for MediCal recipients.
Inheritance checks are generally not reported to the IRS unless they involve cash or cash equivalents exceeding $10,000. Banks and financial institutions are required to report such transactions using Form 8300. Most inheritances are paid by regular check, wire transfer, or other means that don't qualify for reporting.
Any assets left in a Medi-Cal participant's name at the time of death will be subject to Medi-cal recovery. Therefore, if you own a home and it is under your name and you were using Medi-cal then your house is fair game for Medi-cal to come after your home.
If you received a gift or inheritance, do not include it in your income. However, if the gift or inheritance later produces income, you will need to pay tax on that income. Example: You inherit and deposit cash that earns interest income. Include only the interest earned in your gross income, not the inherited cash.
Many people worry about the estate tax affecting the inheritance they pass along to their children, but it's not a reality most people will face. In 2025, the first $13,990,000 of an estate is exempt from federal estate taxes, up from $13,610,000 in 2024. Estate taxes are based on the size of the estate.
California stands apart from the other states. In CA, Medicaid (Medi-Cal) recipients can gift inheritance, which is considered “income”, the month in which it is received. Furthermore, Medi-Cal recipients have no asset limit, and therefore, can have unlimited assets and still be eligible for long-term care benefits.
Immediately after receiving an inheritance, you should notify your local Social Security office. If your inheritance exceeds $963, you'll be ineligible for benefits for at least one month. You'll remain ineligible as long as your resources are more than $2,000.
The California Probate Code allows for victims of inheritance theft to pursue double damages, treble damages, punitive damages, disinheritance of the thief, attorney's fees, and costs in particularly egregious circumstances, so often a letter that explains the potential consequences will be sufficient to convince your ...
Something an executor generally must do, however, is pay all valid creditor claims and outstanding taxes before making any distributions to beneficiaries. If the estate does not have sufficient funds to fulfill these financial obligations, beneficiaries' inheritances could potentially be reduced or eliminated.
The letter must be signed and often notarized, so be sure to check with the appropriate person managing the estate (trustee, executor, or attorney) before delivering any documents to them.