Are IRAs considered Medicaid assets?
If you have assets in IRAs can they be/will they be used as information on medicaid planning? If so how can they be protected?
IRAs provide income tax breaks, but the money in them doesn't get any special treatment by Medicaid. If you apply for Medicaid, IRAs in your name are counted as assets. The fact that you would lose your tax break if you tapped into the IRA funds too early doesn't protect them from consideration by Medicaid.
Assets, including IRAs, can be removed from consideration by Medicaid in one of several ways. If you spend an asset or transfer it -- give it away -- to someone else more than 60 months before applying for Medicaid, it won't be counted in determining your eligibility. Within the 60-month period, you may spend the IRA funds on yourself and not have them counted for Medicaid eligibility. This may include spending it to repair or improve your home, as long as you -- or your spouse, if you're in a nursing home -- live in the home. That's because Medicaid doesn't count your home as an asset unless your equity in it is over $500,000 (up to $750,000 in some states). To find the exact equity cut-off in your state, go to an Internet search engine and enter your state's name plus the words "Medicaid eligibility." What you may not do within the 60-month period is simply transfer the funds to someone else for less than "fair value." In other words, you can't just give the money away to family or friends, or put the money in someone else's name.
When I qualified my dad for Medicaid in Florida I was told by a Medicaid consultant that my Dad's IRA would be considered "income" according to the amount by law he was required to withdraw each year. I had to close the IRA, pay a large tax bill on it and then it was counted as assets. When it was counted as income he would not have been eligible. As assets, we used a large amount of it for improvements to the house prior to his application. Was the "income" information incorrect?
I am amazed at the plethora of bad information on the internet. Mr. Matthews may be correct in certain instances but not in all instances and his answer is not qualified, but stated as an absolute. the second poster got it partially correct. In Florida, an IRA is NOT a countable asset for medicaid financial eligibility purposes IF the IRA is in pay status. The IRS mandated required minimum distribution, however, is countable as income of the applicant and is counted toward the income test for eligibility. If one is over income (would be ineligible for medicaid due to total income over the limit), the fix for that is a qualified income trust. in essence, in Florida, you can never have too much income for medicaid because there is a simple solution to solving the over income problem, a QIT. therefore the second poster had a choice: count the RMDs from the IRA as income and do a QIT to solve the over income issue; OR empty the IRA, pay the tax, and then have the IRA as a countable asset that requires some other technique to make the asset (withdrawn IRA proceeds) noncountable for medicaid eligibility. Please review Section 1640.0505.04 of Florida's Program Policy Manual which you can find online at http://www.myflfamilies.com/service-programs/access-florida-food-medical-assistance-cashprogram-policy-manual#overlay-context=service-programs/access-florida-food-medical-assistance-cash/more-access-florida-links The manual states in part: " Retirement funds must be treated as an asset or as income, unless they are considered unavailable. If an individual is eligible to receive regular payments from a retirement fund, the payments are considered unearned income and the fund is not considered a countable asset to the individual. (If the individual is eligible to receive payments but elects not to, he is ineligible due to failure to file for other benefits to which he is entitled.) If the individual is not eligible to receive payments from the retirement fund, the value of funds currently available is considered a countable asset. Any penalty imposed due to early withdrawal can be deducted when computing the value of the retirement fund, but any taxes due are not deductible." Section 1640.0505.05 deals with Retirement Funds of the community spouse.
I HATE it when people, well-meaning though they may be, give advice about financially important matters that they may think they are well-informed about, but in truth aren't. Know what you know and what you don't know, keeping those straight and not confusing them lest others rely to their detriment on what you tell them.
I appreciate what the commenter above said about retirement accounts and Medicaid eligibility, since it points me in the direction I need to go to get the answers I need at this time in connection with a Medicaid application for my elderly MIL. But their comment focused on a "traditional" IRA which has a schedule of Required Minimal Distributions prescribed by the IRS. Our issue is with a Roth IRA, which has no RMDs, so if more like an ordinary asset, but one that grows tax-free and can be left to heirs to grow tax-free, though in the hands of heirs there are RMDs. How does Medicaid treat Roth IRAs (or other Roth accounts, e.g., 401(k)s, that don't have RMDs) for purposes of qualifying for Medicaid benefits. Can that asset (a Roth) be sheltered? Any place to look for a definitive, reliable answer for Florida Medicaid purposes?
I have same q in NY State. Hubby has a Roth IRA, and a lawyer at a meeting said that the money needs to be taken on a RMD schedule to be exempt from Medicaid. But where to determine the schedule? And when to begin taking the RMD?
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