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How are IRAs counted for Medicaid purposes?

When an elderly or disabled person is looking to apply for long-term care Medicaid in Florida, the applicant must document their income and assets for Medicaid purposes, which are set forth in our asset and income levels webpage

Part of the application process means looking at countable assets. Countable assets include bank accounts, stocks, bonds, mutual funds, annuities and more. Basically, the applicant must disclose all assets as part of the process.  Interestingly and importantly, the applicant's IRA/401K/Qualified Plans may not be a countable asset for application purposes. The rule is that if the applicant is taking periodic distributions from their IRA/401K/Qualified Plans, the account is not a countable asset for Medicaid purposes. Instead, any distributions from the account are counted as income for Medicaid. This would mean, for instance, that any distribution from the IRA/401K/Qualified Plan may go to the nursing home as part of the patient's responsibility. This would also mean that any distributions from these plans could require a Qualified Income Trust, among other important ramifications. An example for Medicaid purposes is as follows:

Example #1: Mom is an unmarried nursing home resident and has $50,000 in her checking account and $50,000 in stocks and bonds. Her gross income is $2,000/month from Social Security. In order to get mom onto Medicaid, she is only allowed $2,000 in countable assets, meaning that she must spend down most of her assets (some $98,000) before Medicaid will assist her. 

Example #2: Same facts but mom only has $10,000 in her checking account and $90,000 in her IRA. If mom is taking period distributions of $300/month from her IRA, she will only have the checking account as a countable asset for Medicaid purposes, with the IRA not counting as an asset. Interestingly, the $300/month coming from the IRA will take mom over the income cap for Medicaid purposes. Also, any distributions from the IRA will be countable income for Medicaid purposes.

In both examples, your elder would want to see a good elder law attorney to assist with the Medicaid application. In example #1, the elder law attorney may be able to help the elder legally spend down the assets. In example #2, an elder law attorney would be needed to help establish the Qualified Income Trust.

There are no easy Medicaid applications and every situation is different, but if you or your loved one needs help to pay for their long-term care, we can help you. We have free monthly seminars where you can learn more about estate planning and Medicaid planning.

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D. Rep DeLoach III
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