16 May Can Medicaid recover money left to a disabled adult child?

Q. If estate recovery is deferred to an adult disabled child, what are the regulations and conditions attached? Are there specifics as to how this money is spent? The only assets left behind are several bank accounts.

— Confused

A. It seems you’re asking about Medicaid estate recovery in New Jersey.

Let’s start at the beginning.

In order to qualify for Medicaid benefits an individual must have liquid assets of no more than $2,000, said Shirley Whitenack, an estate planning attorney with Schenck, Price, Smith & King in Florham Park.

“Pursuant to New Jersey Medicaid regulations, the state cannot recover against the estate of a deceased Medicaid recipient if the amount sought is less than $500 or the gross estate of the deceased recipient is less than $3,000,” she said.

If the amounts in the bank accounts exceed $2,000, there may have been incorrectly paid benefits to the deceased person, she said.

The Medicaid regulations say that no recovery will be made if there is a surviving spouse or a surviving child who is under the age of 21 or is blind or permanently disabled, Whitenack said. But the state can recoup incorrectly paid benefits even if there is a surviving adult child who is disabled, she said.

“If there were no incorrectly paid benefits, then the adult disabled child can spend the money however they choose,” she said. “If the adult disabled child also receives Medicaid benefits or Supplemental Security Income (SSI), however, the inheritance may jeopardize those means-tested benefits unless they can be spent down or deposited in an ABLE account or a special needs trust.”

If you’re not sure, you should speak to an experienced estate planning attorney who can examine the specifics of your situation.

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This story was originally published on May 16, 2022.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.