Different Situations will Dictate Different Approaches to your 401k or IRA

If you are in need of long-term care and are receiving or plan to receive New York Medicaid assistance, Medicaid will consider your 401k or IRA assets to be an available source of money to pay for your care, unless the account is in “payout status.” Payout status means that you are at least taking the “required distribution” from your account each year. Depending on the county where you reside, the required distribution for Medicaid purposes can differ from the required distribution for Internal Revenue Service purposes. So you need to be careful to determine this amount correctly.

In payout status, your retirement assets are not counted as Medicaid resources. However, the monthly payments that you receive are treated just like any other income. The way your accounts should be managed and protected will vary from situation to situation. If you are receiving New York Medicaid Home Care benefits any surplus income can be protected by a Pooled Income Trust. If you’re married and receiving Medicaid nursing home benefits, your monthly income can be given to your spouse to bring her up to the Medicaid maximum (the “MMMNA”) and you keep a personal needs allowance of $50 per month. If you’re unmarried and receiving Medicaid nursing home benefits, the nursing facility is entitled to all of your monthly income except for $50.

If you expect to live much longer, it may be beneficial to withdraw funds from the retirement account, pay the income taxes that are due, and then transfer the net proceeds to an asset protection trust, even if the retirement account is already in payout status. On the other hand, if life expectancy is short, there are often financial advantages to leaving the retirement plan in payout status and allowing the nursing home to collect the income while you are still alive. Upon your death, your named beneficiaries can then withdraw the balance in a lump sum or over time.

As you can see, finding the best solution for retirement assets demands careful analysis. It is best to have a qualified New York Elder Law attorney assisting you in weighing these complicated decisions.

If you would like help determining the best way to protect your hard-earned retirement savings, call our office today to set up an initial consultation: (212) 447-8690.


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