Retirement assets are in a category of their own.
A qualified retirement account such as an IRA or 401(k) is treated as an exempt asset so long as the account is in pay status. Accordingly, the retirement account does not need to be surrendered or transferred – a good thing since either action can result in heavy income taxes and possible penalties for early withdrawal.
Pay status means that the account owner is receiving a monthly income distribution from the retirement account. When an individual is 70 ½ years old, the IRS requires that the account owner receive a required minimum distribution (RMD) from the account. For Medicaid purposes, the applicant must take out a maximum amount each month. As long as the Medicaid applicant is in receipt of or has applied for periodic payments, the principal of the retirement fund will not be counted as a resource for Medicaid eligibility purposes. Accordingly, an applicant can be eligible for Medicaid benefits even if he or she has an IRA or retirement fund of any value – as long as the applicant is receiving a monthly payment.
If you are not yet 70 ½, you can still elect to put the retirement account in pay status. Just be sure to calculate the maximum monthly income amount if you are applying for Medicaid benefits.
It is important to note that the monthly payment will be counted as income and will be budgeted by Medicaid – meaning that the monthly distribution will have to be paid to the nursing home or health care provider along with your other monthly income (Social Security, pension benefits, etc.).
The Medicaid rules are very complex and vary by benefit program.
Be sure to call upon our Elder Law attorneys to help you navigate the rules and ensure the best outcome. Cona Elder Law attorneys are always available to answer any of your questions. Contact Cona Elder Law here.
Cona Elder Law is a full service law firm based in Melville, LI. Our firm concentrates in the areas of elder law, estate planning, estate administration and litigation, special needs planning and health care facility representation. We are proud to have been recognized for our innovative strategies, creative techniques and unparalleled negotiating skills unendingly driven toward our paramount objective - satisfying the needs of our clients.
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