How will this impact his Medicaid? Should I put the money in a separate or special bank account? A fair amount of the money will go towards his hospital bills not covered by Medicaid and I would like to put some into savings for me for later as well.
The $ will be income to you for the month received. Your income per se is NOT an issue for medicaid; it's hubs who has to be impoverished to whatever income levels your state has set. BUT after the month it gets deposited it then goes from being considered income to becoming part of your joint assets AND assets have specific limits allowed by medicaid. For hubs, the asset limit is 2k. But for you - as your are a community spouse - its much much more. Most states have the CS non-exempt asset limit at about 119k. So if you say have just 50k in savings, then the 12k added in, still has you way below the max. allowed. So it doesn't affect Hubs Medicaid eligibility.
Couples dealing with Medicaid where 1 is in a facility but the other remaining a community spouse & likely to be that for years & years, really really needs an experienced NAELA elder law atty to come up with options & plans on how to deal with $ & assets so that you do not become impoverished. If you are healthy & younger side with a demetia spouse, you could outlive him by years or decades. You need to do whatever to keep the max of your assets to be able to have that $. This is where an atty can be invaluable.
If you havent gotten the $ yet, you might want to contact the executor to see of they can hold off on the distribution for a month or two, so that IF you need to do something creative with the 12k, it gives you time to set things up. Executor does have a bit of discretion as to the timing on distributions. Good lck in this and let us know what happens as we all learn from each other.