For many individuals the largest asset they have is their IRA. Many times IRAs will represent half or more of an individual’s assets by the time they reach retirement or are in need of nursing home care. Therefore, protecting that asset can be important but also difficult.
In the context of paying for nursing home care, there is often a discussion of Medicaid. Some people have been told that IRAs are protected from the Medicaid spend down rules. In Ohio, that is not true. An IRA is treated that same as all other assets and must be spent down in order to qualify for Medicaid.
A person’s marital status makes a big difference in qualifying for Medicaid. A single individual can take steps to protect an IRA from the spend-down rules, however, if their stay in a nursing home is sufficiently long enough, the IRA may still be fully used up for those costs. Using a combination of gifting to children or an Irrevocable trust and creating a Medicaid Compliant Annuity (MCA) can help reduce that possibility, but some amount of the IRA will likely be needed to pay for care.
When there is a married couple and only one of them is in need of nursing home care, then some or all of the IRA assets can be made payable to the spouse who does not need care (the community spouse). This can be accomplished by using a MCA to roll IRA assets into and listing the community spouse as the beneficiary of monthly payments, or death benefits, or both. By doing this the IRA can be kept in an qualified account, so there is no large tax bill and the funds remain available for the community spouse to use.
The specifics of how to protect an IRA will be determined by a host of factors and are too complex to cover in a short video or article. If you want to learn more about how to protect IRAs from the high cost of nursing home care, call us at 419-872-7670 to set an appointment to talk to one of our attorneys about your options.