Before we address the question that serves as the title of this blog post, we should explain why Medicaid can be relevant to you, even if you are going to qualify for Medicare as a senior citizen. The United States Department of Health and Human Services tells us that 40 percent of people that reach the age of 65 will eventually need living assistance. Many of them will require nursing home care toward the end of their lives.
The Medicare program will not pay for the custodial care that you would receive in a nursing home. These facilities are extremely expensive, so an extended stay can potentially consume everything that you intended to leave to your loved ones if you have to pay out-of-pocket.
Medicaid will pay for long-term care, and this is why many people take steps to gain Medicaid eligibility. Of course, you are probably aware of the fact that Medicaid is a program that is intended for people with very limited financial resources. In most parts of the country, the limit on countable assets is $2000, but we get a slight break here in New York. In 2018 in the Empire state, the limit is $15,150.
Clearly, that is not a lot of leeway when you are talking about all of the resources that you have been able to accumulate throughout your life. However, there is a bit of good news to pass along. Some assets are not counted, so you to get somewhat of a break from the outset.
If you own a home, it is not counted, but there is an equity limit of $858,000 during the current calendar year. This is adjusted periodically as the value of real estate goes up. Another piece of good news is the fact that there is no equity limit at all if you are married and your spouse is going to remain in the home while you enter a long term care facility.
Another asset that does not count is your car or truck, and your household items are not countable assets. Your personal belongings would not be counted, and you can have a burial plot and up to $1500 saved for final expenses. The same amount of whole life insurance is permissible, and an applicant can have unlimited term life insurance.
As we stated, there is a provision for the healthy spouse when it comes to the home, and there are some other protections for the spouse that can still live independently. If you are applying for Medicaid as a single person, almost all of your income would have to go toward the nursing home expenses. However, things are different if you are married and your spouse is relying on the income.
In Medicaid parlance, the healthy spouse is referred to as the “community spouse.” There is a Community Spouse Resource Allowance that permits the spouse to continue to receive income that is earmarked for the institutionalized spouse. There is a limit, and during the current calendar year in New York, it is $3090.
The community spouse is also entitled to a Community Spouse Resource Allowance. This allows the independent spouse to maintain possession of half of the shared assets that are deemed countable by Medicaid evaluators. There is a limit to this allowance, and in 2018, it is $123,600.
There is also a minimum Community Spouse Resource Allowance that stands at $74,820. To explain the minimum through the utilization of a simple example, let’s say that a couple has a total of $100,000 worth of shared countable assets. Half of that would be $50,000. Because of the existence of the minimum threshold, under these circumstances, the healthy spouse would be able to keep $74,820.
Now that we have set the stage, we can answer the question about individual retirement accounts and 401(k)s. With a traditional individual retirement account, you are required to take mandatory minimum distributions when you are 70.5 years old. This is considered to be “payout status.”
If your account is in this status, the principal would not be counted by Medicaid. With a Roth individual retirement account, you do not have to take mandatory minimum distributions, because you have already paid taxes on the contributions. Since you would not be in payout status, assets in this type of account would be counted by Medicaid.
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Mark S. Eghrari, Estate Planning Attorney
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