Strategies To Protect IRA From Medicaid, Nursing Homes and Taxes

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Many middle class retirees own IRAs and wonder whether they will be forced to deplete those IRAs if they go into a nursing home and attempt to qualify for long term care Medicaid.

Nursing home expenses cause many in America to deplete their estate, preventing them for leaving a financial legacy to their families and loved ones.

Many people transfer assets out of their name (either to their children outright or in trust) five years prior to entering a nursing home in an attempt to protect those assets for the family. But it's not so easy to transfer an IRA (Individual Retirement Account).

Many people wonder whether their traditional or Roth IRAs are "countable resources," forced to be spent on nursing home care.

While Medicaid is a federal program administered by the each different state, Lousiana's rule is clear, "Count funds in an IRA as a countable resource."

Some other states provide that if the IRA is in payout status (owner taking required minimum distributions), then the IRA is not a countable resource.

Some parents easily transfer their non-IRA assets out of their name, while realizing that if one spouse can go into a nursing home, the couple can have $126,420 ( Community Spouse Resource Allowance for 2019) in their name.

But what if the IRA values exceed this amount?

Even though most IRA owners would never consider taking more than their required minimum distributions, perhaps some should consider taking "much more than RMDs each year" in order to pay income tax at rates lower than their beneficiaries, and to move the after-tax amount out of their estate for purposes of long term care Medicaid.

Married IRA owners can also consider naming their children or other heirs (not their spouse) as their primary beneficiaries of their IRAs. Naming your spouse as your primary beneficiary of your IRA is traditional and common, but it also lumps your IRA into your spouse's IRA after you die, forcing your spouse to deplete all of it if your surviving spouse goes into a nursing home.

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This post is for informational purposes only and does not provide legal advice. Please do not act or refrain from acting based on anything you read on this site. Using this site or communicating with Rabalais Estate Planning, LLC, through this site does not form an attorney/client relationship.

Paul Rabalais

Estate Planning Attorney

www.RabalaisEstatePlanning.com

Phone: (225) 329-2450