Will Inheritance Affect My Medicare Benefits?

Medicare is designed to help eligible Americans pay for their health care. You can apply for Medicare the year you turn 65, though it’s also possible for younger Americans with disabilities to qualify. If you’re set to inherit money you may be wondering if the financial windfall will affect your Medicare benefits. The short answer is no, but receiving it could affect what you pay for coverage.

A financial advisor can answer any questions you have about inheritance, taxes, Medicare, or other retirement planning issues.

Medicare Eligibility

Medicare eligibility is based on age, illness and/or disability status rather than income. Inheriting money or receiving any other windfall, such as a lottery payout, does not bar you in any way from receiving Medicare benefits. An inheritance won’t prevent you from receiving Social Security retirement benefits or Social Security disability benefits either.

Generally, you’re eligible for Medicare benefits if you:

Are 65 or older
Are under 65 but have certain disabilities or End-Stage Renal Disease

Medicare Part A

Medicare Part A is hospital insurance while Medicare Part B is medical insurance. You can qualify for premium-free Medicare Part A if you’re 65 or older and you or your spouse worked and paid Medicare taxes into the system for at least 10 years.

You can also get Medicare Part A when you turn 65 with no premiums if you:

Receive Social Security or Railroad Retirement benefits
Are eligible to receive these benefits but just haven’t filed for them yet
Had Medicare-covered government employment

Medicare Part B

Medicare Part B has a monthly premium as well as a deductible and coinsurance. For 2026, the standard monthly premium for Medicare Part B is $202.90. The annual deductible is set at $283. After meeting the deductible, recipients are responsible for paying 20% of the Medicare-approved amount for doctor services, outpatient treatment and durable medical equipment.

Understanding the various costs is important if you have an inheritance coming your way, as that money could affect what you pay for Medicare Part B.

Inheritance and Medicare Part B Premiums

When you’re covered by Medicare Part B, your monthly premium is determined by your tax filing status and modified gross adjusted income (MAGI). In 2026, single filers with a MAGI less than or equal to $109,000 and married couples filing a joint return with a MAGI less than or equal to $218,000 would qualify for the $202.90 standard monthly premium.

If you’re claiming Social Security benefits and your Medicare Part B premiums are deducted from your Social Security payment, it’s possible that inheriting money could affect your premium amount. When your modified adjusted gross income is above a certain amount, you’ll pay the standard premium plus an Income Related Monthly Adjustment Amount (IRMAA). This is essentially a premium that’s added to your premium. For 2026, the maximum you could end up paying monthly for Medicare Part B is $689.90.

This is important to understand if you’re having your Part B premiums deducted from your Social Security benefits. A higher premium means a lower monthly payment from Social Security. This would only be temporary, however, as the lookback period is your tax return from two years ago. So if you were to receive an inheritance in 2026, for instance, that could affect the Medicare Part B premiums you pay for 2028.

Inheritance and Medicaid

Medicaid is also a government program that provides financial assistance with paying for health care. This program covers certain groups of individuals, including:

Low-income families
Qualified pregnant women and children
Individuals receiving Supplemental Security Income (SSI)

Medicaid is administered at the state level and states can extend eligibility to other people, including seniors. Specifically, Medicaid can cover low-income seniors who are also enrolled in Medicare. The difference between Medicaid and Medicare, however, is that Medicaid does take income and financial resources into account when determining eligibility.

If you receive an inheritance while receiving Medicaid, you could be ineligible for benefits. An inheritance will count as taxable income in the month it’s received and you have to notify Medicaid that you’ve received it. If the inheritance puts you over your state’s income eligibility limits then you’d lose your Medicaid eligibility for that month. You could regain eligibility for the next month if you’re able to spend down the entire inheritance in that period. If you’re not able to spend it all down by the next month, any remaining amount would be counted as assets for Medicaid eligibility.

Is an Inheritance Taxable?

Inheritances themselves are not considered taxable income by the IRS. This applies whether you inherit cash, real estate, or investments. However, any income or gains generated by inherited assets after you receive them are generally taxable, unless the asset is specifically tax-exempt.

For example, if you inherit $100,000 in cash and deposit it into a savings account, the inheritance itself is not taxable. But any interest the account earns going forward would typically be reported as taxable income. Similarly, if you inherit stocks valued at $50,000 and later sell them for $60,000, you would generally owe capital gains tax on the $10,000 increase in value.

If you know you’re likely to receive an inheritance, it may be helpful to discuss transfer strategies with the person leaving the assets. In some cases, tools such as trusts can be used to structure how assets pass to heirs and potentially limit estate or inheritance taxes at the family level.

You may also wonder whether disclaiming an inheritance could avoid complications with Medicare or Medicaid. Disclaiming allows assets to pass to the next eligible heir, but if you are already receiving Medicaid, refusing an inheritance can violate lookback rules and jeopardize eligibility.

What If an Inheritance Temporarily Raises Your Medicare Costs?

Medicare Part B premiums are based on income from your tax return two years earlier, which means a one-time inheritance can affect what you pay even if your normal income level has not changed. This timing mismatch is often surprising to beneficiaries, especially when the inheritance does not reflect a permanent increase in financial resources or spending power.

Higher premiums triggered by a temporary income spike are not necessarily permanent. Medicare recalculates Part B premiums annually, and once the higher-income year falls out of the two-year lookback window, premiums may return to lower levels if your income drops back below the IRMAA thresholds.

In some situations, beneficiaries can request a new determination of their premium. If you experience a significant reduction in income after the year you received an inheritance—such as retiring, cutting back work hours, or losing other income—you may be able to submit documentation showing your current income is lower than what appears on your prior tax return. If approved, Medicare can adjust your premium based on the updated income information.

How inherited assets are handled can also influence future Medicare costs. Selling inherited investments, taking distributions, or realizing large capital gains in a single year can push income higher. Spreading transactions across multiple years or coordinating sales with lower-income years may reduce the chance of repeatedly crossing IRMAA thresholds.

Understanding that an inheritance may cause a short-term increase in Medicare premiums—but not necessarily a long-term one—can help frame planning decisions around timing, withdrawals and income management following a windfall.

Bottom Line

A man reviewing if an inheritance will affect his Medicare benefits.

Will inheritance affect my Medicare benefits? It won’t hurt your eligibility to receive benefits but it could affect what you pay, depending on whether you’re already receiving Social Security benefits and your modified adjusted gross income. It’s also important to note that if you plan to apply for Medicaid to help pay for long-term care, an inheritance could affect your ability to qualify. Talking to a financial advisor or Medicaid planning professional can help evaluate these issues before any decisions are made.

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