Is it Too Late When you are Already in a Nursing Home — Treatment of IRAs
This edition of the Koldin Report E-Newsletter continues a series that answers the question, “Is it too late to protect any of your life savings when you are already in a Nursing Home?” This edition reviews the Medicaid treatment of Individual Retirement Accounts (IRAs) when you are in a Nursing Home. All prior newsletters are saved on our website. You can read them by clicking here.
If you are in a Nursing Home, your life savings must be $14,850 or less for 2016 in order to be eligible to receive Medicaid. The community spouse (healthy spouse) is entitled to retain one-half of the couple’s combined life savings, but not less than $74,820 and not more than $119,220. If the couple’s or single person’s resources exceed the resource allowance, then the excess normally must be spent on the cost of care before Medicaid eligibility can be established.
Nursing Home patients and their families are often given incorrect information that they must cash in their IRAs and use those funds towards the cost of care as well.
However, there are special rules for IRAs and other types of retirement accounts. The IRA is considered to be an available asset to be spent on your cost of care as part of your life savings for Medicaid eligibility purposes unless your IRA is in periodic monthly “payout status.”
When your IRA is in monthly payout status, the Medicaid Agency will treat your IRA as monthly income subject to the income contribution rules, rather than as part of your life savings.
Periodic payout status means that you are receiving regular periodic payments from your IRA based on life expectancy tables. Some county Medicaid Agencies require IRAs to be paid out based on the IRS payout tables. Some county Medicaid Agencies require IRAs to be paid out based on Medicaid’s own life expectancy tables, which are much shorter. Other counties use one table for the applicant and a different table for the at-home spouse.
If you live longer than your life expectancy under the required payout table, your IRA could become fully depleted by the monthly payments being contributed toward your cost of care.
If your at-home spouse is receiving a monthly IRA payout, he/she may or may not be required to contribute towards your cost of care depending on the total family income.
One of the decisions that the family must make when you or your spouse is in a Nursing Home is (1) whether to cash in either or both of your IRAs and then use other asset preservation methods which are discussed on the Koldin Law Center‘s Website here or (2) whether to put the IRA into payout status and be subject to the income contribution rules which are discussed on our website here. The Koldin Law Center, P.C. regularly counsels its Medicaid clients on the advantages and disadvantages of each asset protection option.
When the Koldin Law Center, P.C. handles a Medicaid case, we not only handle the entire application process, but we also review asset protection options with our clients including options for protecting IRAs. We review with our clients who are already in a Nursing Home options to protect some or all of their assets beyond merely establishing Medicaid eligibility.
There is something you can do.