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Lev
Lev, Tax Advisor
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Greetings Sir, I have a question about Medicaid for seniors

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Greetings Sir,

I have a question about Medicaid for seniors with less than $2,000 in assets. I am aware of the 5-year look back provision, but I wanted to ask two things in particular:

1) Are primary homes excluded from assets that would eliminate eligibility for Medicaid long term care assistance?

2) Are assets in any retirement account excluded?

3) Lastly, are assets in a ROTH IRA that doesn't require required minimum withdrawals excluded?

Thank you.

Lev :

Hi and welcome to Just Answer!
1) Are primary homes excluded from assets that would eliminate eligibility for Medicaid long term care assistance?


The home is an excluded resource in determining Medicaid eligibility, regardless of its value. Medicaid policies protect the home for the use of recipients and certain close relatives.


A recipient’s house can lose its protected status and become an asset available to pay for long-term care when it is no longer a “home.”


When does the transition happen? An exempt “home” generally becomes a countable asset -- that is, its equity value is counted against Medicaid eligibility limits -- if the owner has no living spouse or dependents and


--Moves into a nursing home or other medical institution on a permanent basis without the intent to return,
--Transfers the home for less than fair market value, or
--Dies.


Using home equity: When the house is no longer a "home" and becomes a countable asset, Medicaid may require its equity to be spent on the homeowner's healthcare costs. A lien may be imposed on the home to ensure this outcome. The homeowner may also lose his or her Medicaid eligibility, at least temporarily.


See for reference - http://aspe.hhs.gov/daltcp/reports/hometreat.htm

Lev :

2) Are assets in any retirement account excluded?
Retirement funds such as IRAs, 401(k)s, and pensions are excludable resources if they are being distributed in periodic payments that include a portion of principal.
Thus - when you set a minimum distribution based on your age from the retirement account even if such distribution otherwise is not required - the distributions are counted as your taxable income in the month received - and as your income for Medicaid eligibility, but assets in your retirement account would be excluded.

Lev :

3) Lastly, are assets in a ROTH IRA that doesn't require required minimum withdrawals excluded?
Similarly to the previous question - even the Roth IRA is NOT subject of RMD after your turn 70 1/2 - assets in the Roth IRA.
In order for the Roth IRA account to be an exempt asset for Medicaid eligibility - you should set periodic payments as it would be in case of RMD. You do not have to set periodic payments for tax purposes - but if you want the Roth IRA account to be an exempt asset for Medicaid eligibility - that is needed. If you do not set periodic payments - the Roth IRA account will be counted for Medicaid eligibility purposes.

Customer:

Thank you sir for hte thorough responses to each question! Most answer some and skirt around, but not all!

Customer:

My only other question is for the ROTH IRA, do periodic withdrawals have to be made at the earliest 70 1/2? Also, must it be a certain amount annually, or monthly, or quarterly? Trying to withdrawal as little as possible so beneficiaries can get a tax-free inheritance and also don't want to disqualify myself from Medicaid for large withdrawals.

do periodic withdrawals have to be made at the earliest 70 1/2?
There is NO Required Minimum Distribution for Roth IRA - thus age is NOT relevant for Roth IRA.
However if the owner of the Roth IRA applied for Medicaid - assets in Roth IRA account will be countable assets. In order for the Roth IRA to be exempt - periodic payment distributions should be set. The age is irrelevant in this case.

Also, must it be a certain amount annually, or monthly, or quarterly?
Yes - that will be a minimum amount to be distributed - which is based on the age and is set annually. The IRS has a table representing Life Expectancy based on the age - see page 93 in this publication - http://www.irs.gov/pub/irs-pdf/p590.pdf .

For instance if you are now 50 years old - your Life Expectancy is 34.2. Thus if the value of your Roth IRA is $100,000 on Dec 31, 2012 - your distribution in 2013 is expected to be $100,000 / 34.2 = $2924.

 

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