Is My IRA Safe From the Nursing Home?

Ruder Ware

After working and saving, clients are concerned that unexpected costs will become unplanned for drains on their Retirement Accounts (e.g, 401(k), IRA, Roth IRA, 403(b), etc.). As the need to pay for nursing home care nears, those concerns grow and questions begin to be asked about whether retirement accounts are safe from the nursing home. The answer is the lawyer’s favorite answer: It depends.

As clients explore options to pay for nursing home care, medical assistance (i.e., “Medicaid”) is often looked at as an option. Medicaid is referred to as a “means tested program.” A means tested program compares what you own to the program’s asset limit to determine whether or not you qualify. When looking at what you own, Medicaid classifies your assets in three categories: available, exempt, or unavailable. If an asset is classified as either exempt or unavailable, that particular asset is not counted. Only available assets count towards the asset limit. If your total available assets is greater than the asset limit, you do not qualify for Medicaid.

Because Medicaid is a joint program between federal and state governments, each state is allowed to have slight variations in determining eligibility for Medicaid. It is important to keep this in mind as you research the laws for your state. A general Google search may lead you to information that does not apply to where you live. For example, to be eligible in Wisconsin, the asset limit for individuals is $2,000, and for married couples it is $128,420. In Illinois, however, the asset limit for married couples is only about $111,000.

When dealing with Retirement Accounts, state rules vary on whether or not those accounts are available assets. If the Retirement Accounts are available, then they are not safe from the nursing home. In Wisconsin, the general rule regarding Retirement Accounts for a single person is that these accounts are available assets. This often leads to the difficult decision of whether to liquidate the Retirement Account and pay income tax in order to engage in Medicaid planning or use the Retirement Account to pay for nursing home care over time.

However, married couples in Wisconsin do not count all Retirement Accounts as available assets (note: this is not true in all states). For Medicaid purposes, a married couple consists of a “Community Spouse” and an “Institutionalized Spouse” (I prefer to use the term “Nursing Home Spouse”). The spouse who is not applying for Medicaid is called the “Community Spouse.” The spouse who is applying for Medicaid is referred to as the “Nursing Home Spouse.” All of the Community Spouse’s Retirement Accounts are classified as exempt assets. This means that 100% of the Community Spouse’s Retirement Accounts will not count toward the couples’ total available assets. This is particularly helpful if the Community Spouse has the larger Retirement Accounts. Unfortunately, just like the single individual, the Nursing Home Spouse’s Retirement Accounts are not exempt and are an available asset and are counted when determining Medicaid eligibility.

As you can see, the answer to whether or not your Retirement Account is safe from the nursing home depends on several factors: are you single or married; are you the Community Spouse or the Nursing Home Spouse; are you living in Wisconsin or another state.  But do not despair, as there are additional rules that may provide opportunities to protect an otherwise available Retirement Account. You should talk with a qualified elder law attorney to discuss whether any of those options might be available to you.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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