Many people in New Jersey rely on Medicaid to help pay for long-term care. However, Medicaid has strict rules about income and assets. These rules can affect what happens to a person’s estate after death.
When someone plans to apply for Medicaid or is already receiving it, a last will and testament must include careful Medicaid planning to protect their assets and support their family.
What to consider about Medicaid
One key issue involves the Medicaid estate recovery program. After a person who received Medicaid benefits dies, the state may try to recover those costs from their estate. This means the home, bank accounts or other property left behind could go toward repaying Medicaid. A will that ignores this risk may leave little for the person’s heirs.
How to adapt your will accordingly
To account for Medicaid when writing a will, people often take steps to reduce the size of their estate before death. This may include placing certain assets in a Medicaid-compliant trust. These trusts can hold property without counting it as part of the estate. That can protect it from Medicaid recovery while still allowing the person to use it during life.
Some people choose to give gifts to family members more than five years before applying for Medicaid. Medicaid uses a five-year look-back period to see if the recipient gifted any assets away to qualify for benefits. Gifts made during that time may cause a penalty period. A will should not rely on these gifts unless they fall outside the look-back window.
Naming the right beneficiaries also matters. For example, leaving assets directly to a disabled child through a standard will may disqualify that child from receiving their own benefits. Instead, the will could direct the assets into a special needs trust to protect eligibility.
Every estate plan should match the person’s current and future financial goals, including plans for long-term care. Wills alone do not protect assets from Medicaid recovery. They work best when paired with other planning tools designed to preserve wealth and meet Medicaid rules.