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Can a Beneficiary of Undistributed Trust Principal Qualify for Medicaid?

Example: a Medicaid recipient is a beneficiary of a trust, he is to get the funds upon the death of the person who made the trust. The person who made the trust died two years ago. The money was not distributed yet, money stayed in the trust for two years. The person kept getting Medicaid, without disclosing the trust to the New York HRA.

About this trust. This is not an income trust. This trust is almost like a will. The beneficiary simply gets the funds upon the death of the person who made the trust. This is not a medicaid trust or special needs trust. The principal of the trust is available for an immediate distribution to the beneficiary.

Did the Medicaid recipient qualify for Medicaid? No. As a rule, anything available to the recipient is counted as an asset. Even if the beneficiary does not yet have access to it.

Should the recipient have reported the trust as an asset to Medicaid? Yes.

Can he disclaim the trust? Deadline for disclaimer is 9 months, so if he’s had a trust for two years, he’s past the deadline. But that’s beside the point, because a disclaimer wouldn’t help for Medicaid anyway – the HRA would count the trust as an asset.

Can he transfer the funds to someone else? He may be able to transfer the funds to someone else and try to qualify for Medicaid after the transfer.

Will there be Medicaid recovery? Medicaid is likely to ask for recovery for the time a person was receiving Medicaid while having this trust asset. The Medicaid recipient could possibly transfer the funds and then qualify for Medicaid, but would still suffer from recovery for the time they had Medicaid while having a trust asset. He would not necessarily have to pay the full amount of the recovery claim, there is room for negotiation. However, one would have to be careful, as the New York HRA does have the authority to escalate the claim to a criminal investigation.