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Elder Planning Isn't Just For The Elderly

Understanding the Impact of IRA’s and 401k’s on Medicaid Eligibility

All too often it comes as a huge surprise to my clients when they learn that IRA’s, Keogh’s, 401k’s and other qualified retirement accounts that are in pay out status (meaning one is receiving his or her required minimum distribution or a regular periodic payment) are not counted as an available resource (an asset which effects eligibility) for Medicaid eligibility purposes. Hypothetically, one could have a million dollar IRA and/or 401K and still be eligible for Medicaid nursing home or home care so long as he or she is receiving his or her required minimum distribution (RMD). However, the RMD is counted as available income for Medicaid eligibility purposes and may disqualify you for Medicaid.

Thus, when one is applying for either Medicaid home care and/or Medicaid nursing home care, irrespective of whether or not one has attained age 70 ½, it will be necessary that one take his or her RMD in order that the retirement account not be counted as an available resource for Medicaid eligibility purposes.


Because the owner of a Roth IRA is not required to take a minimum distribution, for Medicaid eligibility purposes the full amount of the Roth IRA is considered an available resource for eligibility purposes irrespective of the age of the Medicaid recipient in New York.


As there is not a taxable event resulting from a distribution from a Roth IRA or liquidation of a Roth for both Medicaid nursing home or home care, the transfer of the Roth to one’s spouse or to a blind or disabled child as an exempt transfer (no effect on eligibility) is generally easy to accomplish.


One type of asset that many mistakenly believe to be like an IRA or 401K even though it is not is a non-qualified annuity. Long term care/Medicaid planning for Non Qualified Annuities can be problematic because of the potential income tax/capital gains consequences of a change of ownership of some non-qualified annuities.


As is often the case, planning for one’s long term care needs is always best accomplished through advanced planning. Utilization of an Irrevocable Medicaid Asset Protection trust is highly effective in protecting one’s home, condo and/or co-op and non IRA/retirement savings for Medicaid eligibility purposes. Advanced planning is critical in planning for one’s long term care needs.


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