STATES AND MEDICAID RULES
In a previous article (https://chia.owly.net/35121-2/) we discussed the negative issues with Traditional IRAs (401k, Keogh, SIMPLE, etc). Now we talk about some potential positives (depending on the state in which you live). Retirement is a literal minefield of negative financial possibilities. Getting old is not for the faint of heart. My wife is not strong with finance issues, she just told me: “Leave me a list of things I should do if you go.” I have those lists in our estate planning notebook.
Where you live MATTERS a great deal if you need help paying for your health needs, like nursing home care.
Michigan has a sweet deal for those who are house rich and need Medicaid assistance. For example, let’s say you own a VERY NICE $5million HOME. In Michigan, if you need help from Medicaid your home’s value will not be taken from your heirs. Michigan has the only state Medicaid office which doesn’t put a lien on homes. (There are restrictions, however. If you are receiving Medicaid help in Michigan and you sell your property, they will require you to use up to all of that money as an asset to pay your medical bills).
That being said, some other states (including Kentucky) do allow houses to be placed in protective trusts. (see last paragraph)
However, if you have a ton of money in your personal retirement accounts AND live in Michigan, Michigan Medicaid will count those funds as resources which must be used before Medicaid picks up the bills. So, if you are IRA rich you might still want to move when you retire.
If you have a large amount of money in Traditional IRAs and you suspect you will eventually need state Medicaid assistance, what states are better? By the way, about than a third of retirees WILL need such assistance.
According to eldercareresourceplanning.org:
– If you live in Kentucky, North Dakota or Washington, D.C., your retirement accounts are exempt and will NOT be counted against Medicaid’s eligibility asset limit regardless of payout status. [this is for the applicant spouse only]
– If you live in California, Florida, Georgia, Idaho, Mississippi, New York, Rhode Island, South Carolina, Vermont or some Ohio counties, your [applicant] retirement accounts will NOT be counted against Medicaid’s eligibility asset limit if they are in PAYOUT status.”
So, clearly there is a significant Traditional IRA benefit to living in KY, ND, or Washington, D.C. (but don’t live in D.C.) if you want to preserve significant IRA resources and you will need care in a nursing home.
MARITAL FUNDS:
Again, according to eldercareresourceplanning.org:
“In general, assets belonging to either spouse in a married couple are considered by Medicaid to be jointly owned. This means that assets owned by either spouse will count against Medicaid’s eligibility asset limit for either spouse, even if only one of them is applying. For example, a savings account in the name of a non-applicant spouse will count against the asset limit of the applicant spouse.
However, the following exceptions apply when it comes to retirement accounts:
In Alaska, California, Delaware, Georgia, Idaho, Indiana, Kansas, Kentucky, North Dakota, Pennsylvania, Utah, West Virginia, Wisconsin, Wyoming or Washington, D.C., retirement accounts [Traditional IRAs] owned by the non-applicant spouse will NOT be counted against the applicant spouse’s asset limit for Medicaid eligibility regardless of payout status.
In Florida, Mississippi, New York, Rhode Island, South Carolina, Vermont and some Ohio counties, retirement accounts owned by the non-applicant spouse will NOT be counted against the applicant spouse’s Medicaid eligibility asset limit if they are in PAYOUT status.
Roth IRAs can have huge benefits when dealing with Medicaid, however because a Roth IRA can’t go into payout status, your state WILL count it against your Medicaid eligibility. Make sure to balance your investments between the two forms of assets no matter where you live. Talk with an elder care financial planner for the best solution for your future.
WOWEE!!!
Some states provide much better resource protection for retirees than others!!! How does your state stack up? These articles have a 50-state comparison chart: www.eldercareresourceplanning.org/medicaid-faq/assets/retirement-accounts/
or: www.smartasset.com/retirement/how-can-i-protect-my-ira-from-medicaid
When planning what state in which to retire you should look at which states will help the surviving spouse to maintain resources. Many states clobber retirees by taking half of the house and almost all IRA investments away from the surviving spouse…making that person a pauper…and leaving very little for their heirs except bills and burials. The surviving spouse is forced to maintain a home which is way too big for one person…because the moment he or she sells it, half of the value will be clawed back by the state. He or she won’t have enough money to purchase a more efficient home which is closer to family or even move to a warmer state.
Remember, monthly payouts from IRAs usually do count toward asset limits. However, the non-applicant spouse is allowed a living expense. The 2024 Maximum MMNA is $3,853.50/month and the Minimum MMNA is $2,465/month ($29,580-$46,242 annual). Yours will be somewhere between those two numbers. Hope you don’t have loan payments!
One final thought: Confused? Clearly, the government does this on purpose in order to claw back resources on which you already paid taxes. That’s totally unfair to those who did the right thing by putting back money for their futures! Further, the amount of assets most states allow a couple to keep for future hasn’t increased in decades.
A few states allow certain legal means of protecting assets. You should see a lawyer to take advantage of such things. A few thousand spent now could save you $200,000 later. AND TIME MATTERS!!! Do it NOW or sooner! There is usually a 5 year look back period.
Someone you know needs to know this information. For others it is already too late. They’ve already been sucked into the vortex.
[PLEASE NOTE that Don is always open to discussing the thoughts and opinions he shares here and welcomes comments as shared in the comment section. He doesn’t use other social media platforms and won’t see whatever you’d like to share with him if you post it elsewhere.
ALSO, Don is always open to offer his thoughts on various topics. If you have a specific request, you can let him know in a comment; he reads – and replies to – them all. ~ Sherry]
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