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. Generally, a single person is only allowed to have some $2,000 in countable assets while a married couple will be allowed some $128,000 (this amount changes every year) in countable assets.
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 purposes. 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. The application of this rule can be pretty tricky, with an example 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 Medicaid to pay for mom's nursing home care, 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. Of course with a good elder law attorney, assets can be protected from the nursing home.
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, meaning she will need an income trust in order to get Medicaid. Also, any distributions from the IRA will be countable income for Medicaid purposes, which means that mom will not be able to take money out of the IRA once she is on Medicaid to use it for her benefit!
In both examples, mom or her family would want to see a good elder law attorney to assist with the Medicaid application and possible protection of assets. 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, among other things.
Interestingly, the concept of the IRA as income an not an asset may present further problems. Once the applicant receives Medicaid, only the RMD can be taken out without effecting Medicaid substantially. If the elder wants money for their own spending, to pay for their funeral expenses or even to pay for their own home, once that person is on Medicaid, any distribution from the IRA will create problems. When an elder needs Medicaid and their sole asset is an IRA, we frequently work to make a larger distribution the month before we need Medicaid in order to have some funds set aside. A good elder law attorney can help protect the assets and apply for Medicaid.
As we can see, an IRA would generally not need to be protected from nursing home spend down as long as the applicant is receiving their required minimum distributions. If you want to learn more about spending down assets from long-term care Medicaid, we have more information here.
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 can help you from anywhere in Florida as well.
People who read this may also want to read:
- Bypassing the Florida Medicaid Waitlist for Assisted Living Facilities
- My loved one is in the nursing home - is it too late to protect assets?
- Asset Protection and Florida Medicaid Planning
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If you want to learn more about Medicaid and asset protection in Florida, or are helping your aging loved one and need some help, please feel free to download our free book, Don't Lose Your Nest Egg to a Florida Nursing Home!