I often hear clients say that they know they won’t qualify for Medicaid assistance to help pay nursing home costs because they and/or their spouse have a large retirement account(s), such as Individual Retirement Account (IRA), Simplified Employee Pension Individual Retirement Account (SEP IRA), 401(k), or similar retirement plan. However, we can now protect both spouses’ retirement accounts.
According to current law, regulations, and policy in Indiana, the retirement account(s) of the at‐home spouse (commonly called the “Community Spouse”) of a Medicaid applicant (Nursing Home/Waiver‐at home services requested to be paid by Medicaid commonly called the “Institutional Spouse”) are NOT to be treated as countable asset(s) that would affect eligibility to have Medicaid pay for a nursing home or Medicaid approved services at home. Therefore, a large retirement account in the name of the spouse of the Medicaid applicant would not affect the applicant’s Medicaid eligibility.
In addition, the retirement account(s) of the Medicaid applicant (Institutional Spouse) will not affect the person’s ability to have Medicaid pay if the retirement accounts are in payout status; that is, receiving “regular periodic payments” from the IRA. If the Medicaid applicant is over 70 ½ years of age, and currently receiving their Required Minimum Distribution (RMD), the balance of the retirement account is not counted and would not affect Medicaid eligibility.
Also, If the Medicaid applicant is over 59 ½ years of age(but under 70 ½ years of age), they could start (if haven’t done so) to make regular periodic payments (we prefer monthly) from a retirement account that would also protect the principal balance of the retirement account and not affect Medicaid eligibility.
These loopholes allow the hard‐earned principal of retirement accounts of both spouses to be fully protected. Of course, the “regular periodic” payments that come out would go to the nursing home costs and be subject to normal income tax rules.
It is important that beneficiaries be named on the retirement accounts to prevent estate recovery on the Institutional Spouse’s IRA by the Medicaid program; failure to do so can result in full recovery from the balance of the retirement accounts at the death of the Medicaid recipient; in effect, losing what was accomplished in good planning.
If you or a loved one have questions about how to protect retirement accounts, or other assets, and qualify for Medicaid to pay for nursing home costs (or at‐home care costs, in some cases), then I invite you to call or text my office at (812) 423‑1500 to schedule a FREE consultation to discuss your case with my Medicaid planning team.