Have you considered the possibility that you will need to pay for long-term care (LTC) when you are older? If not, you should. Given the high cost of nursing home care, many seniors turn to Medicaid to help cover those expenses. Qualifying for Medicaid, however, could threaten your retirement nest egg if you failed to plan. For example, if you are one of the many people who is planning for retirement by funding an Individual Retirement Account (IRA), you need to consider whether Medicaid can take the funds in your IRA and plan accordingly. The Grand Forks Medicaid planning attorneys at German Law discuss how an IRA account impacts your eligibility for Medicaid.
The Cost of Long-Term Care
The longer you live, the higher the odds that you will end up in a nursing home. Paying for that care could put your assets at risk given the high cost of LTC. For 2021, the average cost of LTC across the nation was over $100,000. Like most seniors, you may rely on Medicare to cover most of your healthcare expenses once you retire; however, because Medicare excludes LTC, you won’t be able to turn to Medicare for help with your LTC bill. Unfortunately, most health insurance policies also exclude LTC expenses. Medicaid does cover LTC expenses; however, the need to qualify for Medicaid can put your assets at risk because of the low income and asset thresholds used to determine eligibility.
Can Medicaid Take Your IRA through the Spend-Down Requirements?
To qualify for Medicaid, an applicant must meet the income and assets limits. The value of your “countable resources” must fall below the program’s limit which is as low as $2,000 for an individual. If you have excess resources when you apply, Medicaid will deny your application and expect you to “spend-down” your resources in order to qualify. Fortunately, some assets are exempt from consideration when applying for Medicaid. Medicaid will count your IRA or 401k as an available source of funds to pay for your care unless it is in payout status. “Payout status” means that you are taking at least the required distribution out of your plan monthly. If your IRA account is in payout status, the monthly payment will be counted as income which will impact the Medicaid income limits. Either way, your IRA funds will be considered when applying for Medicaid unless you included Medicaid asset protection strategies in your estate plan ahead of time.
Can the Medicaid Estate Recovery Program Take My IRA?
Your initial eligibility evaluation for Medicaid is not the only time your assets could be at risk. The Medicaid Estate Recovery Program (MERP) puts your assets at risk once again after your death. The purpose of MERP is to allow the individual states to try and recover some of the funds they spend on Medicaid recipients after the recipient’s death. The MERP rules allow the state to file a claim against the recipient’s estate, for the amount spent on the recipient, during the probate of the estate. Assets included in your estate after your death are, therefore, still at risk of being lost to Medicaid. There are, however, some limits to MERP. MERP cannot go after your property if any of the following apply:
- There is a spouse who is still alive.
- There is a child under 21 years of age.
- There is a child of any age who is blind or permanently and totally disabled under Social Security requirements.
- If doing so would cause an “undue hardship”
In addition to the legal exclusions, the individual states have considerable discretion when deciding to pursue MERP claims. Some states routinely file claims against the estates of all Medicaid recipients while other states are more selective about filing claims.
Contact the Grand Forks Medicaid Planning Attorneys
Please join us for an upcoming FREE seminar. If you have additional questions or concerns about Medicaid planning, contact the Grand Forks Medicaid planning attorneys at German Law by calling 701-738-0060 to schedule an appointment.
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