New Rules for Treatment of Retirement Accounts

This edition of the Koldin Law Center E-Newsletter reviews important new rules regarding how retirement accounts are treated when applying for Medicaid coverage for nursing home care in New York State.

All prior newsletters are saved on our website. You can read them by clicking here.

Medicaid Resource Allowance – General Rules

If you are residing in a nursing home, your countable life savings must be $32,532 or less (2026 limit) to qualify for Medicaid.

If you are married, the community spouse (the spouse living at home) is entitled to retain one-half of the couple’s combined life savings, subject to the following limits:

• Minimum: $74,820
• Maximum: $162,660

If a single individual or married couple exceeds these resource limits, the excess assets must generally be spent on the cost of care before Medicaid eligibility can be established.

Families are often told—incorrectly—that all IRAs must be cashed in and used toward nursing home costs. Fortunately, special rules apply to IRAs and other retirement accounts.

Retirement Accounts in “Payout Status”

An IRA (or other retirement account) is considered a countable asset for Medicaid purposes unless it is placed into periodic monthly payout status.

When an IRA is in monthly payout status, Medicaid treats the account as income, subject to income contribution rules, rather than as part of your life savings.

For most individuals, “payout status” means receiving Required Minimum Distributions (RMDs) as required under federal law.

Old Rules: Rapid Depletion of IRAs

Under prior Medicaid rules, the state used its own life expectancy tables, which required significantly higher monthly IRA distributions.

As a result, many families were forced to rapidly deplete retirement accounts to pay for nursing home care.

New Rules: Greater Protection for IRAs

Under the new rules, Medicaid now recognizes the lower federal RMD amounts, rather than its own tables.

This change allows many families to preserve a much larger portion of their retirement savings while still qualifying for Medicaid.

Protecting IRAs from Medicaid Estate Recovery

Under current law (which is subject to change), upon the Medicaid recipient’s death, the Medicaid Agency may seek reimbursement from assets in the recipient’s probate estate.

If an IRA has properly designated beneficiaries, it does not become part of the probate estate and is therefore not subject to New York State Medicaid estate recovery.

Community Spouse IRA Income Rules

If the at-home spouse is receiving monthly IRA distributions, those payments may or may not be required to contribute toward nursing home costs. This depends on the couple’s total household income and applicable Medicaid income rules.

Key Decision: Cash In the IRA or Use Payout Status

When a spouse enters a nursing home, families must decide whether to:

• Cash in one or both IRAs and pursue other asset-preservation strategies, or
• Place the IRA into payout status and comply with Medicaid income contribution rules

Additional asset protection strategies—such as transfers to exempt individuals, gifting and promissory note planning, annuities, and spousal refusal—are discussed on our website here.

Estate Planning and Irrevocable Trusts

Under the old IRA rules, the high required monthly distributions sometimes exceeded nursing home costs, resulting in Medicaid ineligibility.

Under the new rules, the required IRA income is typically lower than nursing home costs, meaning families may need to use other assets to cover the difference.

An Irrevocable Trust is one planning option that may help protect life savings while still qualifying for Medicaid coverage.

If you previously ruled out Irrevocable Trust planning due to income concerns, it may be time to revisit your options under the new law.

Learn more about Irrevocable Trust planning here

How We Can Help

The Koldin Law Center, P.C., located in East Syracuse, New York, has over 50 years of experience helping individuals and families navigate elder law, estate planning, and Medicaid planning.

Our practice is limited exclusively to Elder Law, including:

• Medicaid planning and applications
• Asset protection strategies
• Wills, Powers of Attorney, and Health Care Proxies
• Revocable and Irrevocable Trust planning

When we handle a Medicaid case, we do more than submit the application—we review strategies to protect assets both before and after Medicaid eligibility is established.

We offer no-fee initial consultations, and we welcome the participation of adult children, attorneys, accountants, and financial advisors.

There is something you can do.

We are here to help.

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Our Attorneys speak to groups throughout New York State as a public service. If you would like to arrange for one of our Attorneys to speak to your group, please contact our office.

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We appreciate your referrals

We have been told by many clients who are in a crisis that they wish they had known about our firm much sooner. We are proud of the many families we have helped in times of crisis.

We are also proud of the many families we helped avoid financial crisis by doing estate planning in advance.

We all share the responsibility for making our family and friends aware of the planning options available to them.

Your referral to the Koldin Law Center could make a major difference in the lives of your family and friends if they are someday faced with a long term illness.

Remember that the Koldin Law Center offers many services for clients of all ages. Our services range from basic estate planning such as a simple will to complex estate planning including asset preservation planning.

THERE IS NO FEE FOR THE INITIAL CONSULTATION