Happy senior couple saving retirement plan and pension money - Shutterstock ID 1062331313 By MicroOne
A 2018 Medicaid IRA rule offers nursing home cost protection for married couples. Illustration of a happy senior couple saving retirement plan and pension money
By MicroOne – Shutterstock ID 1062331313

Homes and land used to be most people’s most valuable assets, but many retirees’ retirement plan values rival or exceed the property values. Long-term health costs threaten those prized assets when an ailing person’s health issues require rehabilitation or nursing home care. This article explains surprising new IRA protection opportunities created by recent Indiana Medicaid rule changes, so that people can consult with elder law attorneys to protect assets.

Basic Indiana Medicaid Eligibility Requirements for Nursing Home Residents

Indiana’s general Medicaid rules treat married and unmarried people differently when they apply for Medicaid assistance to pay nursing home costs (an average cost of $6,527/month). An unmarried nursing home resident must have no more than one vehicle, some personal items, and other assets worth $2,000 or less. A married nursing resident has the same general limits as an unmarried person, but the resident’s spouse can keep a home, other land, the spouse’s IRA, and as much as $126,420 worth of other assets in some cases.

Medicaid Policy Changes for IRAs

Indiana Medicaid policy changed within the past 5 years to allow a married nursing home resident’s spouse to keep the spouse’s IRA plus other assets. The state of Indiana surprised elder law attorneys with a 2018 Medicaid policy change about a nursing home resident’s IRA. The surprising part of the new policy is that nursing home resident does not have to cash an IRA and spend the money down to $2,000 if the resident receives regular, periodic the retirement account payments. The new Medicaid policy treats retirement account payments as income that the resident must pay for nursing home care.

Lack of Medicaid IRA Rule Clarity

The new Medicaid policy says a nursing home resident’s IRA counts as part of the $2,000 resource limit if retirement account payments are sporadic withdrawals. The policy offers no clear distinction between “regular” and “sporadic” payments.

Medicaid IRA Rule Problem for IRA Owners Over 70 ½ Years of Age

The regular/sporadic uncertainty can be a big issue for retirees that are older than 70 ½ years of age. Federal tax law requires an IRA owner must withdraw required minimum distributions (RMD) from an IRA after reaching 70 ½ years of age. The amount of the RMD changes each year as the IRA owner’s life expectancy changes. Unfortunately, the Medicaid policy says nothing about whether the RMD change is “sporadic”

Probable Future Medicaid IRA Rule Changes

The state of Indiana often changes a new Medicaid rule several times before settling on a clear rule. At about the same time as Indiana changed its IRA rule, the state also changed its rules on life insurance policies and prepaid funeral plans at least twice. The state’s recent rule-changing behavior indicates that the state may modify the regular/sporadic IRA payments policy at least once in the next year or two, so people should check with their elder law attorneys before assuming anything about existing Medicaid .

Asset Protection Planning Big Picture

The 2018 Medicaid rule changes are just the latest examples of Medicaid law turbulence. Most experienced elder law attorneys focus cautiously on the big picture about all Medicaid rules. Elder law attorneys may be able to protect many retirement plans with the new IRA payments rule, but other asset protection planning issues may require other tactics. Medicaid law turbulence increases the need for people to seek estate planning and asset protection guidance from experienced elder law attorneys.

About the Authors

Jeff R. Hawkins and Jennifer J. Hawkins have practiced in the areas of trusts, estates, and elder law for over 26 years. Both lawyers are Trust & Estate Specialty Board Certified Indiana Trust & Estate Lawyers and active members of the Indiana State Bar Association and National Academy of Elder Law Attorneys. Both lawyers are admitted to practice law in Indiana, and Jeff Hawkins is admitted to practice law in Illinois. Jeff is also a registered civil mediator, a Fellow of the American College of Trust and Estate Counsel and the Indiana Bar Foundation;  a member of the Illinois State Bar Association and the Indiana Association of Mediators; and he was the 2014-15 President of the Indiana State Bar Association. Find more information about these and other topics at www.HawkinsLaw.com. © Copyright 2018 Hawkins Law PC. All rights reserved.

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