Medicaid Treatment of Individual Retirement Accounts (IRAs)
November 8, 2010
This edition of the Koldin Report E-Newsletter reviews the Medicaid treatment of Individual Retirement Accounts (IRAs). All prior newsletters are saved on our website can be found by clicking here.
For many people their IRA is the largest part of their life savings. If you need long term care in a Nursing Home or at home, you could be required to liquidate your IRA and spend the proceeds on your cost of care.
We are often asked whether IRAs can be protected from Medicaid. The Medicaid treatment of IRAs is very complex. Although IRAs are governed by Federal Law, many counties in New York State have different interpretations of the Federal Law.
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. However, if your IRA is in periodic monthly “payout status,” Medicaid 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 whether to cash in either or both of your IRAs and then use other asset preservation methods (which will be discussed in subsequent newsletters) or whether to put the IRA into payout status and be subject to the income contribution rules. The Koldin Law Center, P.C. regularly counsels its Medicaid clients on the advantages and disadvantages of each option.
When the Koldin Law Center, P.C. handles a Medicaid case, we handle much more than just the application process. We review with our clients the proper steps to protect their assets beyond merely establishing Medicaid eligibility. There is something you can do.