Will an IRA Affect Medicaid Eligibility?
Published: Fri, 06/27/14
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Will an IRA Affect Medicaid Eligibility? If you cannot view the image below, please read the article on our blog.
 Q. My husband, Chuck, and I are both retired and on Social Security. Chuck also has a modest employee pension plan and an IRA. We live in Northern Virginia.
Although we are both in relatively good health now, we're concerned about what will happen to his retirement funds if one of us needs nursing home care and needs to qualify for Medicaid in the future. I heard that this past week, the Supreme Court held that inherited IRAs are not considered to be retirement funds. Does this mean that they are not exempt for the purposes of Medicaid eligibility? A. For many Medicaid applicants, individual retirement accounts (IRAs) are among their biggest assets. Your question assumes that regular IRAs are exempt assets for Medicaid, but this in fact is not the case. IRAs in Virginia, and in many other states, count as available assets with regard to Medicaid eligibility. Virginia Medicaid Eligibility In Virginia, for a nursing home resident to qualify for Medicaid, his or her resources cannot exceed $2,000. Resources include anything that can be converted to cash, including (but not limited to) real property, bank accounts, cash value life insurance. IRAs, 401(k)s, and annuities with cash value also count, despite any penalties that may apply to an early withdrawal. In some states IRAs and other retirement accounts are "non-countable" resources in Medicaid planning if they are in "pay-out" status, meaning that the owner has reached the age where Required Minimum Distributions are required to be taken, but this is not true in Virginia or most other states. When it comes to inherited IRA's, the recent Supreme Court decision that you are asking about held that funds in an inherited IRA are not "retirement funds" under federal law and are therefore not exempt in bankruptcy (Clark v. Rameker), unlike regular IRAs and other "retirement funds" which are exempt in bankruptcy. Virginia Medicaid Laws However, bankruptcy laws and Medicaid laws have nothing to do with each other, and just because an asset is exempt in bankruptcy or exempt from lawsuits does not mean that the asset is exempt in connection with Medicaid. On the contrary, as stated above, it is important to understand that even though IRA's and other retirement accounts are exempt from bankruptcy and some other creditors, they are NOT exempt from Medicaid. The general rule of thumb is this: if you can cash in the asset, it is a countable resource for Medicaid eligibility. Therefore, IRAs and other retirement funds are countable assets for Medicaid because they can be withdrawn by the applicant at any time.
Virginia Medicaid Complexity Medicaid laws are the most complex and confusing laws in existence, and impossible to understand without highly experienced legal assistance. Without proper planning and legal advice from an experienced elder law attorney, many people spend much more than they should on long-term care, and unnecessarily jeopardize their future care and well-being, as well as the security of their family. Please read the Medicaid Complexity page on our Website for more details. Virginia Medicaid Planning Nursing homes in Northern Virginia cost $10,000-$14,000 a month, which can be catastrophic for most families. If you are nearing the need for nursing home care or are you simply looking to plan ahead in the event nursing home care is needed in the future, the time to start planning is now. Life Care Planning and Medicaid Asset Protection is the process of protecting your assets from having to be spent down in connection with entry into a nursing home, while also helping ensure that you or your loved one get the best possible care and maintain the highest possible quality of life, whether at home, in an assisted living facility, or in a nursing home. Learn more at The Fairfax and Fredericksburg Elder Law Firm of Evan H. Farr, P.C. website. Call 703-691-1888 in Fairfax or 540-479-1435 in Fredericksburg to make an appointment for an introductory consultation.  Is there Compensation for Family Caregivers?
 Dear Commander Bun Bun,
My mother recently had a stroke. I quit my job and moved across the state to care for her. I love my mother dearly and enjoy the time we have together. However, I am having trouble making ends meet. Is there any compensation available for family caregivers like me? Sincerely, Anita Paichek --------- Dear Anita, Most caregiving starts out as a labor of love, but it can quickly grow into an expensive obligation. Many caregivers, such as yourself, who had to quit their jobs to provide care for a loved one, are struggling with heavy financial responsibilities. However, when it comes to getting compensated for being a family caregiver, there are several options you can explore: If you pay at least half of your mother's yearly expenses, and her annual income was below $3,900 in 2013 (not counting Social Security), you can claim her as a dependent on your taxes, and reduce your taxable income by $3,900. See IRS Publication 501 or call the IRS help-line at 800-829-1040 for information.
Hop this helps! Commander Bun Bun About Commander Bun Bun Commander Bun Bun is a Holland Lop rabbit that lives at the Farr Law Firm along with our two Siamese cats and two African Dwarf frogs. She enjoys all of the petting and attention she gets from the staff and clients of the firm. We encourage you to visit us and meet her and our other extraordinary critters!
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