Must I Liquidate the Money in My IRA and Spend it Down for Care, Before I Can Apply for Medicaid?
Do the rules permit a nursing home to force a resident to liquidate an IRA and spend it down to pay for care, before they are eligible for Medicaid? Likewise, can a nursing home make the spouse who is not in a nursing home liquidate money in an IRA and spend it on care for the spouse?
The answer to these questions is based on the state in which you live, because Medicaid eligibility and spend-down rules vary by state. For example, in New Jersey, the answer to both of these questions is yes. In Texas, the answer is “it depends.”
nj.com’s recent article “Can a nursing home make me spend down an IRA before applying to Medicaid?” says that there’s no protection in New Jersey for IRAs, when it comes to Medicaid. The same is true in Minnesota, Nevada, and Oregon. By contrast, in California and Florida, IRAs and other retirement plans are protected (non-countable). In Texas, there are still many unanswered questions about the treatment of these assets. Although changes were initially announced in August 2018, the Texas Health and Human Services Commission (HHSC) has yet to publish a written policy covering this.
While it is not the nursing home that is making this demand, it is the Medicaid program itself that requires the spend-down. The nursing home is likely just doing what they have been told.
However, with the help of a Medicaid planning attorney, you can implement a strategy to preserve the spouse’s IRA up to a maximum of $126,420 for 2019. In addition, the nursing home resident’s IRA can, in some cases, be converted to a Medicaid annuity. Your Medicaid planning attorney will save you a significant amount of money, when compared to the legal fees. For the spouse remaining in the community, the attorney can make sure that she or he has sufficient money to live on.
While Texas can be a very difficult state in which to qualify for Medicaid, there’s always the possibility that advance planning will shelter significant assets. Attorneys’ fees are typically paid from one of the assets that must be spent down to obtain Medicaid eligibility.
Whether Medicaid planning with an attorney is worth the expense, depends on how much could be saved or sheltered. If, for example, Medicaid planning will cost $10,000, but there is the opportunity to shelter $100,000 from long-term care expenses, it is well worth doing for the $90,000 that would be protected. A $10,000 investment that returns $90,000 is a good investment, by anyone’s standards.
Talk to an estate planning or elder care attorney in your state, who can look at the specifics of your finances to see if you can benefit from their services.
Reference: nj.com (September 18, 2019) “Can a nursing home make me spend down an IRA before applying to Medicaid?”