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When it comes to IRAs and Medicaid eligibility the question that gets asked is, “How does my IRA affect my eligibility for Medicaid?”
Many states share similar guidelines when it comes to exempt and non-exempt assets in IRAs. Essentially, it boils down to this: if the IRA is not in payout status (the IRA owner is not taking required minimum distributions) then the assets in the IRA are included (non-exempt) in the determination of eligibility. However, if the IRA is in payout status and the owner is now taking required minimum distributions (RMDs) the total amount of the IRA is not included, but the annual income from the RMDs is.The same would be true regarding 401(k)s, 403(b), and other qualified plans that may require RMDs after age 70 ½.
There are some states (Illinois for example) that treat IRAs, a 401(k), and pensions as exempt. Check your state’s laws to see where you fit in.
Another asset that works similarly is an annuity. Like the IRA, if an individual owns and annuity and it is not in payout status (it hasn’t been annuitized), the entire account balance is deemed non-exempt and it is considered an includible asset. If the annuity has been annuitized and is now rendering a steady stream of guaranteed payments, then the annuity balance is not included, but the annual income from the annuity payments is.
Sterling Raskie, MSFS, CFP®, ChFC®
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Thanks, Steven, I’ll check into it.
Nice information here.
Here is a related question: If a spouse of a person receiving medicaid receives an inheritance, how does the inheritance impact the medicaid recipient?
Hi Steven,
The inheritance could potentially affect the recipient’s Medicaid eligibility. He or she would want to spend it down quickly (i.e. paying the nursing home for that month, etc.) and then consider consulting with an attorney on how to effectively remove the money from their possession and regain Medicaid eligibility.