Act Two - YOUR GUIDE TO RETIREMENT PLANNING AND LIVING
by Karen E. Klein with expert Melissa Negrin-Wiener, Esq.
The Problem: My mother is 72 years old and will be entering a nursing home shortly. She has very few assets but owns an IRA worth $200,000, from which she is taking a minimum distribution. Will she be required to spend down the $200,000 before she is eligible for Medicaid benefits?
The Expert: Melissa Negrin-Wiener, elder law and estate planning attorney, Cona Elder Law, Melville.
The Rules: In order to qualify for Medicaid benefits, an individual must have less than $4,200 in assets. This amount is referred to as the “resource allowance” which is determined by the state of New York. An IRA (or other qualified retirement funds) in “pay status” are treated as exempt resources and do not count towards the individual’s resource limit. Pay status means that the account owner is taking the required minimum distribution if she is 70 ½ or older.
How it Works: When your mother enters the nursing home, her monthly IRA distribution must be paid to the nursing home along with her Social Security and any other pension benefits she receives. She may keep $50 a month for personal expenses.
If your father is still living in the community, a certain amount of your mother’s income may be contributed to your father’s living expenses, to bring his income up to the community spouse income allowance, which is currently $2,541 a month.
An alternative strategy: If your mother stayed at home and received community Medicaid benefits, she would be entitled to keep $700 a month of her income. Another option would have in that case would be to set up a “Pooled Income Trust,” a supplemental needs trust that is managed by a nonprofit organization. Participants contribute their excess income to the trust to be used for expenses such as mortgage payments, rent, food, utilities, recreational activities and clothing. This alternative only applies to individuals receiving community Medicaid benefits.
The Results: Your mother’s IRA will not have to be spent down to qualify her for Medicaid benefits.