If you have transferred assets without receiving fair value in return within five years of applying for Medicaid, you may be subject to a penalty period. If the money you received from the lawsuit has not been transferred to someone else, then you should not be penalized. However, in order to qualify for Medicaid, you can only have a certain amount of assets ($2,000 in most states). Therefore, you may have to spend down your assets in order to qualify. Medicaid rules vary by state, so you should contact an elder law attorney in your state to help you figure out your options. Here is a directory of attorneys: http://www.elderlawanswers.com/elder-law-attorneys.
For more information about Medicaid’s asset rules, click here.
For information on receiving a settlement and preserving Medicaid, click here.