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Ask an Advisor: Can a Nursing Home 'Take Our IRA?' My Wife and I Are Elderly. We Have a $100K IRA and a Trust to Protect Our Assets.
May 19

Graham Miller, CFP«

My wife and I are elderly. I have an individual retirement account (IRA) worth about $100,000, and we have a trust set up through our children to protect our assets. If one or both of us have to go into a nursing home, can they take our IRA? What do we need to do to protect it?


How do you prevent that from happening? The specific answer depends on variables you didn't reveal. But in my experience, when people talk about ''protecting'' assets from LTC costs, they often have Medicaid in mind. So what does that look like? (And if you need more help planning for long-term care costs, consider working with a financial advisor ).

Qualifying for Long-Term Care Through Medicaid
So now you are faced with a paradox: The assets you want to save by means of
cheap healthcare are an obstacle to getting cheap care in the first place.

It is at this point that an estate attorney or well-meaning friend might suggest you rearrange your assets in such a way as to exempt them from the eligibility limits. The idea is to make yourself less wealthy on paper to qualify for Medicaid without actually giving away your assets.

If this sounds tricky, that's because it often is. For one thing, many states use a five-year lookback period when determining Medicaid eligibility. This means that if you do any fancy asset-shuffling in the five years before applying, your efforts will have been in vain. (And if you need help determining whether you're eligible for Medicaid, consider matching with a financial advisor. )

3 Ways to Protect Your Assets from Medicaid
If you're willing to plan ahead and do your homework, there are a few options
for relocating your assets so that you can potentially qualify for Medicaid.

Annuities: Any money you put into a ''Medicaid-compliant'' annuity will not count
against your asset limit and will be exempt from the lookback period, as well.
The catch - and it's a big one - is that the money is totally locked up, except
for whatever periodic payment you receive from the annuity. And that payment
will count against the income eligibility limit.
Home equity: In most cases, any equity you have in your primary residence will
not count against the Medicaid asset limit. So you could protect your assets by
putting them toward your mortgage or even upgrading your home. But the lookback
period also applies here, and in some states, the government may claim part of
your home equity to recoup care costs after your death.
Trusts: You mentioned having a trust already set up, but there is a type of
trust designed specifically for this situation. Putting your money into a
Medicaid asset protection trust (MAPT) effectively hands it over to someone else,
so it is technically no longer yours and does not count against your Medicaid
eligibility. Just remember that the handoff must be completed five years before
you go on Medicaid.
As you may notice, the common problem with these methods is that they
drastically restrict what you can do with your assets. And by taking away your
financial independence, to some extent they leave you poor in reality - not just
on paper.

By The Associated Press, Copyright 2023

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