Jan102026
Estate Planning Q&A Series

What happens if I keep my disability back payment in my bank account while I’m receiving Medicaid? – North Carolina

Short Answer

In North Carolina, keeping a disability lump-sum back payment in a regular bank account can create a Medicaid eligibility problem if the balance causes countable resources to exceed the program’s limit for the Medicaid category involved. When that happens, Medicaid can close or deny coverage until resources are reduced to an allowed level, and the county department of social services may require proof of what happened to the funds. Planning options may include a properly structured trust or a compliant “spend down,” but timing and the Medicaid category matter.

Understanding the Problem

In North Carolina, a person who already receives Medicaid can ask: can a disability back payment be kept in a bank account without losing Medicaid? The key decision point is whether the Medicaid program category being used treats the back payment as a countable resource once it is sitting in the account. The actor is the Medicaid recipient, the duty is to stay within the program’s financial limits and report changes as required, and the trigger is the month the lump sum is received and the months that follow.

Apply the Law

North Carolina Medicaid eligibility is administered through the county department of social services under state and federal rules. Many Medicaid categories for people who are aged, blind, or disabled use resource (asset) limits, and cash in a bank account is commonly treated as a countable resource. A lump-sum back payment can be especially risky because it can push a bank balance over the limit quickly and create a “not eligible” month unless the funds are handled in a way Medicaid allows. Separate from eligibility, North Carolina also has an estate recovery program that can seek repayment from certain estates after death in situations defined by law.

Key Requirements

  • Medicaid category and financial test: The specific Medicaid coverage group controls whether there is a resource limit and how money in accounts is counted.
  • Countable resources include bank balances: Funds kept in a checking or savings account are typically treated as available resources unless a specific exclusion applies.
  • Permitted planning vs. penalized transfers: Some ways of moving money are allowed (for example, certain trust planning), while giving money away for less than fair market value can create a penalty in long-term-care-related Medicaid contexts.

What the Statutes Say

Analysis

Apply the Rule to the Facts: The facts describe a Medicaid recipient in North Carolina who receives SSDI and a lump-sum back payment and is worried about keeping it in a bank account. If the Medicaid category has a resource limit, the back payment sitting in the account can be treated as a countable resource and can push the recipient over the limit. If that happens, the county department of social services can determine the recipient is not eligible for Medicaid for the affected period unless the funds are reduced in a permitted way and the recipient can document what was done with the money.

Process & Timing

  1. Who reports/acts: The Medicaid recipient (or authorized representative). Where: the county department of social services that manages the Medicaid case in North Carolina. What: report the lump-sum receipt and provide bank statements and award letters if requested. When: as soon as possible after receipt, because eligibility is often evaluated month-by-month and delays can create overpayment issues.
  2. Eligibility review: The county may request verification, re-check resources, and issue a notice if coverage will close or change. If the issue is excess resources, the case typically turns on whether the funds were spent down on permitted items or moved into a permitted planning vehicle and whether documentation supports that.
  3. Stabilizing eligibility: Common approaches include (a) a documented spend down on permitted expenses and exempt resources, or (b) trust planning that fits Medicaid rules (often a pooled trust structure for certain situations). The right approach depends on the Medicaid category and whether long-term care rules are in play.

Exceptions & Pitfalls

  • Different Medicaid categories treat money differently: Some Medicaid groups are not resource-tested the same way as others, so the correct answer depends on the coverage category, not just the fact that SSDI is involved.
  • Gifts can backfire: Giving the money to family or transferring it for less than fair market value can create a penalty for certain long-term-care-related Medicaid services under North Carolina’s transfer rules. See N.C. Gen. Stat. § 108A-58.1.
  • Trusts must be done correctly: Not every trust protects eligibility. For pooled trust planning, North Carolina law includes specific requirements, including payback from remaining funds. See N.C. Gen. Stat. § 36D-12. Poorly drafted or improperly funded trusts can be treated as available resources.
  • Documentation problems: Large cash withdrawals, missing receipts, or commingling funds can make it hard to prove a permitted spend down, which can delay reinstatement or trigger adverse action.
  • Estate recovery is a separate issue: Even when eligibility is preserved, North Carolina may seek estate recovery in situations defined by statute. See N.C. Gen. Stat. § 108A-70.5.

Conclusion

In North Carolina, keeping a disability lump-sum back payment in a regular bank account can jeopardize Medicaid if the balance causes countable resources to exceed the limit for the Medicaid category involved. The safest next step is to confirm the Medicaid category and then take one compliant action—either a documented spend down or appropriate trust planning—before the end of the month the funds are received, and report the change to the county department of social services with clear records.

Talk to a Estate Planning Attorney

If Medicaid eligibility is at risk because a disability back payment is sitting in a bank account, an estate planning attorney can help evaluate the Medicaid category, the timing, and whether a compliant spend down or trust option fits the situation. Call us today at (919) 341-7055.

Disclaimer: This article provides general information about North Carolina law based on the single question stated above. It is not legal advice for your specific situation and does not create an attorney-client relationship. Laws, procedures, and local practice can change and may vary by county. If you have a deadline, act promptly and speak with a licensed North Carolina attorney.

Category: Estate Planning Q&A Series

Author: Pierce Law

Pierce Law Group is a North Carolina law firm focused on probate administration, real estate partition matters, and surplus funds claims across North Carolina. We know these situations often come with stress, family dynamics, and time-sensitive decisions—so we prioritize clear communication, steady guidance, and a practical plan from day one. Our goal is to make a complicated process feel manageable, while protecting what matters most to you.