Public Benefits and Effects on Inheritances in Successions

Authored By: Lagniappe Law Lab

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How does inheritance affect the public benefits the heir receives?

The inheritance of any asset(s) of a succession may have an effect on any public benefit received by an heir. This covers succession issues with beneficiaries and the public benefits they receive. This includes how inheritances affect the public benefits received by an heir. It also includes asset benefit rules and some exceptions to the asset benefit rules. The inheritance of any asset(s) of a succession may have an effect on any public benefit received by an heir.

Receiving Government Benefits After an Inheritance

Many individuals who live with a disability or receive help from governmental programs. This may include Medicaid and Supplemental Social Security Income (SSI). This goes over information about inheritances that a beneficiary might get as a large sum. This resource goes over access to governmental programs the beneficiary received after inheritance.

A person can get a large gift from the inheritance of a relative. This person may wonder how this might impact how they can continue to get help. Many government programs are needs-based. When a person gets an inheritance of a large sum, this might be another source of income.

  • SSI benefits might get jeopardized after an inheritance

  • Medicaid benefits might get jeopardized after an inheritance.

Government programs have strict income rules. Anyone who receives an inheritance while on Medicaid or SSI could lose coverage.

Public Benefit Asset Limit Rules

  • Exceeding asset limits can create ineligibility for an heir to receive public benefits. 

    • e.g. An heir inherits a share in a family home property asset. The heir may be ineligible for public benefits even if their share in the home is worth only a small amount.

  • Other Situations which might also affect an heir’s eligibility for SSI, Medicaid payments for nursing home care, and other public assistance programs including: 

    • Donating Inherited Assets to Others 

    • Renouncing a Succession 

  • There are other exceptions to asset limit rules. You can ask an attorney for advice and information regulating any specific program. An attorney can consult with you about the effects of the succession on public benefits you get.

SSI and Medicaid recipients including disabled and/or elderly persons

Medicaid and Social Security are need-based programs - based on income and assets. If an inheritance puts a person over the limit, it can disqualify the person from Medicaid and/or social security benefits. 

  • May be ineligible based on asset limit rules if a person inherits a share in an asset like a home.

  • Recipient or co-heir (who does not own another property) must be residing in the property to be exempt.

     

Ways to avoid inheritance issues for those receiving government benefits

  • Medicaid Trust: to protect an heir’s eligibility for Medicaid and SSI. This can be done as part of a will to avoid adverse consequences. 
  • Explore setting up a pooled special needs trust (PSNT). A PSNT provides financial security for those living with disability or special needs. This does not sacrifice the beneficiary's access to needs-based governmental programs.

  • Explore a first-party special needs trust (SNT) - the only type of trust that can get used to place funds received. A first party SNT is the type of trust for a disabled person to put funds belonging to them in.

Find a lawyer or legal help if you need more help with this area of financial planning. Ask about the solutions you might find to resolve inheritance issues. Find out if you can set up an SNT or PSNT to avoid issues.

Exceptions to Asset Limit Rules Common in Forced Heir Situations

  • Exceptions to asset limits rules are common in situations with a forced heir, who inherits. The forced heir inherits due to permanent disability. Their public benefits may be exempt from asset limit rules when they inherit. 

  • Consult with an attorney who can speak to you about how you might protect a disabled heir. An attorney can speak about the effects of inheritance on disability benefits. This may help to avoid ineligibility for access to necessary health care programs.

Other Situations which might also affect an heir’s eligibility for SSI, Medicaid payments for nursing home care, and public assistance programs including

  • Donating Inherited Assets to Others 

  • Renouncing a Succession

Last Review and Update: Jun 29, 2022
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