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Are IRA Assets Protected From Nursing Homes?


When entering a nursing home, the details regarding payment can be dense, leaving you worried and confused about your retirement accounts. Fortunately, your IRA is not automatically seized or applied to nursing home expenses. You may be eligible for Medicaid to help with nursing home costs. If you are not already taking required minimum distributions (RMDs), your IRA could be considered a non-exempt asset. You can learn more about how to protect your personal assets by speaking with a financial advisor.

What Happens to Your Assets When You Go Into a Nursing Home?

If you go into a nursing home, your care expenses could drain your assets. However, government assistance in the form of Medicaid may also help meet the costs. The state you live in will determine if you qualify for Medicaid by considering your assets (and not your spouse’s, if you are married). How your assets impact your Medicaid eligibility depends on the state where you reside.

Additionally, it may be problematic if you are applying for Medicaid and have given assets to your family members in the last five years. Medicaid could prolong your ineligibility according to the value of your gifts and your state’s average rate for nursing home care.

Are IRA Assets Protected From Nursing Homes?

The federal government does not regulate the protection of IRA assets from nursing homes and if you are not already taking required minimum distributions, your IRA could be considered a non-exempt asset. This means your assets could be drained but IRAs are not automatically seized for these expenses. Check with your state to see how its laws affect how your Medicaid eligibility, income level and asset type intersect.

Many states will recognize your IRA as an asset, which can impact your Medicaid eligibility. Depending on your state, whether you currently receive payments from your IRA might also matter. However, in most cases, you can keep at least a portion of your IRA for the benefit of a spouse or other beneficiary.

How IRA and Pension Assets Impact Medicaid Eligibility

are ira assets protected from nursing homes

Some states exempt your IRA assets from Medicaid eligibility, but some of these states require the IRA to be in payout status. IRA-exempt states are currently:

  • California
  • District of Columbia
  • Florida
  • Georgia
  • Idaho
  • Kentucky
  • Mississippi
  • New York
  • North Dakota
  • Ohio
  • Rhode Island
  • South Carolina
  • Vermont

Your IRA’s characteristics can influence Medicaid eligibility as well. The following four conditions will affect how your state calculates your Medicaid eligibility:

1. Payout Status

Your state might not include your IRA when determining your Medicaid eligibility if the account is in payout status. In 2019, the government passed the SECURE (Setting Every Community Up for Retirement Enhancement) Act, stipulating that individuals must receive required minimum distributions (RMD) from their IRAs at age 72.

The RMD is the lowest legal amount you may receive from your IRA (of course, you can receive more if you choose). The IRS calculates the RMD based on the estimated lifespan of retired individuals. Your state likely groups your RMD income with the rest of your monthly revenue.

2. Payout Amount

Your IRA’s RMD will increase your monthly income level and possibly push you over the threshold of Medicaid eligibility. For most states, an individual cannot surpass $2,523 of monthly income and still qualify for Medicaid.

3. Roth IRA Specification

Roth IRAs are distinct in that they have no RMD. You are free to go throughout your retired life and never touch your Roth IRA funds if your other income is sufficient for your expenses. Since your Roth IRA might never distribute payments, your state will likely distinguish it as an asset.

4. Availability of Funds

Some retirement accounts allow the owner to pull the total amount value all at once. If you cash out your entire IRA balance, your state might classify your account as an asset.

Are Your Spouse’s IRA Assets Protected From Nursing Homes?

Many states classify married couples’ assets as owned by both spouses. When applying for Medicaid, this status applies even if the asset is only in one spouse’s name and sometimes extends to the other spouse’s IRA.

Your spouse’s IRA status will also influence if your state identifies the account as an asset or monthly income. However, a community spouse’s monthly IRA distributions will usually not affect your Medicaid eligibility. As a result, your spouse can protect their IRA by putting it in payout status if they are not receiving payments from it already.

How to Protect IRA Assets

Going into a nursing home doesn’t mean you have to distribute your IRA. Though you may have to apply some of your income or assets to nursing expenses, you can take action to preserve your assets.

Change Your Account Status

Check with your state if the RMD from your IRA counts towards your Medicaid eligibility. The idea is to strike the right balance in your IRA so it exceeds neither the asset nor the income limits. This delicate dance can allow you to keep your money and receive Medicaid assistance.

Spend Down or Cash Out

Spending down to qualify for Medicaid is another viable strategy. Therefore, you can liquidate a portion of your IRA for expenses such as life insurance, paying for a funeral plan or burial in advance, and updating your home with age-related amenities such as wider doorways or ramps.

Furthermore, the care you purchase can help diminish your assets. In-home care, nursing home expenses or assisted living payments allow you to spend down and get beneath your state’s asset ceiling.

Distribute Funds to Your Spouse

If you’re married and your spouse is not living in a nursing home, they are known as the community spouse, while you are the institutionalized spouse. Sometimes, the community spouse can preserve up to half of your joint assets. The community spouse resource allowance (CSRA) law allows the community spouse to receive up to $137,400 of your assets.

The minimum monthly maintenance needs allowance (MMMNA) specifies how much income your spouse retains while you are in a nursing home. Medicaid’s spousal protection regulations require your spouse’s income to be a minimum of $2,288.75 per month in 48 states. Keep in mind that Hawaii has an MMMNA of $2,632.50 and Alaska’s MMMNA is $2,861.25 since it costs more to live in each state. The maximum monthly maintenance needs allowance is $3,435 per month.

Once calculated, the government excludes this income when deciding if you, the institutionalized spouse, are eligible for Medicaid.

Purchase an Annuity

If your state considers your IRA an asset, you can put the funds into an annuity that follows Medicaid regulations. Although the asset disappears, you will receive a monthly payment from the annuity. As a result, an annuity can help with your asset count, but it will increase your total monthly income.

The Takeaway

are ira assets protected from nursing homes

Though the laws around Medicaid eligibility and IRA protection are complex, you can take advantage of the conditions your state has set. Going into a nursing home does not necessarily mean your IRA funds will vanish, especially if you understand your asset and income limits. Transferring assets to a spouse or converting an IRA to an annuity can also help.

Tips for Retirement Planning

  • A financial advisor can help you plan for contingencies during retirement. Finding a qualified financial advisor doesn’t have to be complicated. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you protect your assets, get started now.
  • Retirement and long-term care planning aren’t always easy. For help, check out SmartAsset’s retirement tax calculator which helps you determine the friendliest state to retire in, from a tax perspective.

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