Recently, a client asked what would happen to her husband’s retirement income now that he was in a long term care facility and considering applying for Medicaid.
Well, there’s good news and bad- if the retirement fund (such as an IRA, pension, or the like) is in payout status, then the payments themselves will be counted by Medicaid as income to the husband. This income would then have to go to help pay for his cost of care (or “patient liability”), with Medicaid subsidizing the remainder of his room, board, and other expenses.
The bad news is obvious- suddenly the income that the couple had been counting on to live in retirement would no longer be available to the wife. The good news, if there is any, is that only the required minimum distributions (oftentimes called “RMDs”) from the retirement asset are going to go toward paying for long term care.
The balance of the fund (in this case a substantial IRA), is not going to be counted by Medicaid as a resource available to the husband which would otherwise disqualify him from Medicaid eligibility. If it WERE considered an available resource (such as, for example, a cash account with readily available funds), then the couple would have to liquidate the entire IRA and spend it down in order to qualify the husband for Medicaid benefits.
Having only the required minimum distributions available to Medicaid means that there is a chance that the IRA beneficiaries (in this particular case, the wife assuming she outlives her husband) could inherit the balance of the IRA in the event that the husband does not outlive the distributions.
For more information on navigating the world of long term care planning, please contact your legal counsel.
Posted by CCI, 7-14-20. Sources cited: OAC 5160:1-3-03.10.
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