Medicaid Planning with Qualified/IRA Retirement Accounts
Medicaid Crisis Planning is pretty simple when we’re dealing with post-tax accounts (checking, savings, CDs, etc.). Planning becomes more difficult when there are qualified/IRA/pre-tax accounts involved & these accounts are countable.
An "IRA" is an individual retirement account (can never be joint) that a client maintains under special rules allowing the owner to avoid income tax until retirement age. Qualified Accounts/IRAs are pre-tax accounts, meaning that the monies have not been taxed. Once the funds are withdrawn, ownership is changed, or the account is annuitized, tax consequences are triggered. Tax laws impose a financial penalty for early withdrawal of IRA money (sooner than 59 ½), but this fact does not prevent such accounts from being considered countable assets under Medicaid rules. Other types of Qualified Accounts besides IRAs include 401(k)s, 457 plans, TSP, 403(b), TSA, SEP, or SIMPLE accounts.
Each state is different as far as how IRAs are treated for Medicaid planning purposes. States take one of the following positions:
Completely exempt the IRA (non-countable)
Consider the IRA exempt if IRA owner is receiving RMD/regular systematic payments
Completely count the IRA as an available resource/asset (countable)
It may be different for the community spouse (“CS”) and institutionalized spouse (“IS”). For example, Wisconsin and Pennsylvania considers the CS’ account to be exempt but counts the IS’ retirement account as a countable resource.
Check with us if you’re unsure how your state treats retirement accounts and the planning options available to your clients.