Long Term Care PlanningWhen you are planning for Medicaid coverage in a nursing home, it’s important to take any IRAs you own into account.

Medicaid applicants can keep only a small amount of resources (usually $2,400) in order to be eligible for benefits. Certain resources may be exempt from this rule. Whether your IRA is exempt often depends on whether it is in “payout status.”

You can put your IRA into payout status starting at age 59½ if you elect to take regular, periodic distributions based on life expectancy tables. At age 70½, you are required to put your IRA into payout status.

The rules vary from state to state, but often, if an IRA is in payout status, it will not count as a resource for Medicaid purposes. The payments you receive from the IRA will count as income, though. Medicaid recipients are allowed to keep a small amount of income for personal use, and the rest will be paid to the nursing home.

If your IRA is not in payment status and you are the nursing home resident applying for Medicaid, it will typically count as a resource.  However, your spouse’s IRA, if he or she is not applying for Medicaid, will not count as an available resource; it is exempt.

Roth IRAs have their own rules. Usually, since they have no required minimum distribution, Roth IRAs, count as a resource if you are applying for Medicaid.

The rules regarding IRAs and Medicaid are complicated, which is yet another reason why it is good to consult an elder law attorney whenever you are planning for nursing home admission.