Retirement accounts, such as IRAs, are a major asset that can affect a person’s eligibility to qualify for Medicaid nursing home coverage. These assets count toward the asset limit to qualify an individual for Medicaid nursing home coverage. Unfortunately, taking early withdrawals from retirement accounts to help bring a person’s assets below the qualifying limit can trigger tax penalties. However, there are planning techniques that can allow people to qualify for Medicaid nursing home coverage, preserve the value of their retirement accounts, and minimize their tax burden.
Before taking any action affecting retirement accounts for a potential Medicaid application, people should meet with a local, experienced elder law attorney. The primary danger of doing things incorrectly is that people can significantly increase the amount of money they will have to pay out-of-pocket for nursing home coverage and in taxes.
Additionally, Medicaid rules and regulations can vary significantly from state to state. Some states may not count retirement accounts depending on what stage they are in, while others, like Missouri, do. Techniques that qualify someone for Medicaid in one state may not work in another state. These differences from state to state are why it is important to meet with a local attorney who can develop a plan for a client’s specific needs that complies with the laws and regulations in a client’s home state.
One method for dealing with retirement accounts is to shift the account from the spouse who needs Medicaid nursing home coverage, also known as the institutionalized spouse, to the name of the other spouse, also known as the community spouse. This can often be done by converting the retirement account into an annuity for the benefit of the community spouse. The annuity will then generate income for the community spouse, while keeping the retirement account from negatively affecting the Medicaid eligibility of the spouse who needs nursing home care.
Please keep in mind that this technique does not work in every state, nor is it right for every client’s situation, and you should consult with a local elder law attorney before taking any action.
If there is no need for immediate nursing home care, there are more comprehensive planning techniques that can effectively shield a wide range of assets while qualifying individuals for potentially necessary Medicaid nursing home coverage. The more time you have to prepare for a potential nursing home stay the more effective these techniques will be at protecting assets.
To discuss how to properly handle your retirement accounts for a potential Medicaid application, please call Martha C. Brown & Associates at (314) 962-0186.