When Is an Inheritance Not a Good Thing?
Most people think an inheritance is always a blessing — but sometimes, it can do more harm than good.
Imagine this: your spouse is in a nursing home receiving Medicaid to help cover the high cost of long-term care for advanced Parkinson’s. If you pass away first and leave everything directly to your spouse, that inheritance could disqualify them from Medicaid. Suddenly, your life savings would be used to pay for care until it’s gone. That’s the opposite of what you want.
Why Inheritance Can Cause Problems with Medicaid or SSI
Medicaid and Supplemental Security Income (SSI) are “means-tested” programs, which means recipients must have very limited income and assets to qualify.
If someone receiving these benefits inherits money, the new assets push them over the limit. As a result, they lose their benefits and must pay for medical care, housing, and other expenses out-of-pocket — often until the entire inheritance is spent.
How to Protect a Loved One’s Benefits
Instead of leaving money directly to a disabled or ill spouse or family member, it’s better to structure your estate plan to preserve eligibility for public benefits.
This can be done through a Supplemental Needs Trust (SNT), sometimes called a Special Needs Trust. An SNT allows your assets to pay for “extras” that government benefits don’t cover — like home maintenance, real estate taxes, vacations, or special comforts — without jeopardizing essential benefits.
Using a Supplemental Needs Trust (SNT) in Your Will
The best way to create this protection is by including a Supplemental Needs Trust in your Will. When you pass away, your assets are transferred into the trust instead of being inherited outright. A trusted person (called a trustee) manages the funds and uses them only for approved “extras.”
Your loved one continues receiving Medicaid or SSI, while the trust provides additional financial support that improves their quality of life. For Medicaid, this transfer is approved through a simplified probate process, ensuring compliance with state rules.
Contingent and Forced Supplemental Needs Trusts
Even if your heirs are healthy and not receiving benefits, including an SNT can still make sense. You can set it up as “contingent”, meaning it only activates if a beneficiary becomes disabled or starts receiving benefits.
Alternatively, you can establish a “forced” SNT that always holds assets in trust. This structure ensures maximum flexibility: while beneficiaries are healthy, funds can be distributed freely. If anyone later becomes disabled, the SNT automatically adjusts to meet Medicaid or SSI eligibility requirements.
The Bottom Line
An inheritance should support your loved ones — not accidentally create financial hardship. Planning ahead with a well-crafted Supplemental Needs Trust helps protect your assets, preserve eligibility for essential programs, and ensure your loved one’s comfort and security.
Talk to Us About Protecting Your Inheritance
If you’re ready to discuss how to leave an inheritance without risking Medicaid or SSI benefits, our team can help.
At Aging in Maine, we design estate plans that protect your legacy while safeguarding your family’s future.
📞 Call us today at (207) 848-5600 to schedule a consultation and start your planning with confidence.
