In this kind of situation, we advise clients to spend down the money over $2,000 before the end of the calendar month in which the funds are received. For instance, if the money arrives on June 13th, it must be spent down by June 30th. Then, we inform the state Medicaid agency in writing about everything that happened, sending the letter by certified mail. Technically, the funds your father-in-law received were income that should be paid towards his care, but in practice our state’s Medicaid agency has never asked for the payment. We recommend that you check with your state Medicaid agency or a local elder law attorney to make sure this practice works in your state.
For more on how Medicaid treats income, click here.