Must Spend Down an IRA Before I Can Apply for Medicaid?

Do the rules permit a nursing home to force a resident to spend down an IRA and spend it down to pay for care, before they’re eligible for Medicaid? Likewise, can a nursing home make the spouse who’s not in a nursing home spend down an IRA and spend it on care for the spouse?

The answer to these questions is based on the state in which you live, because Medicaid eligibility and spend-down rules vary by state. For example, in New Jersey, the answer to both of these questions is yes.

nj.com’s recent article “Can a nursing home make me spend down an IRA before applying to Medicaid?” says that there’s no protection in New Jersey for IRAs, when it comes to Medicaid. The same is true in Minnesota, Nevada, and Oregon. By contrast, in New York, California and Florida, IRAs and other retirement plans are protected (non-countable).

While it’s not the nursing home that’s making this demand, it’s the Medicaid program itself that requires the spend-down. The nursing home is likely just doing what they’ve been told.

However, with the help of a Medicaid planning attorney, you can implement a strategy to preserve the spouse’s IRA up to a maximum of $126,420 for 2019. In addition, the nursing home resident’s IRA can, in some cases, be converted to a Medicaid annuity. Your Medicaid planning attorney will save you a significant amount of money, when compared to the legal fees. For the spouse remaining in the community, the attorney can make sure that she or he has sufficient money to live on.

While New Jersey is a very difficult state in which to qualify for Medicaid, there’s always the possibility that advance planning will shelter significant assets. Attorneys’ fees are typically paid from one of the assets that must be spent down to obtain Medicaid eligibility.

Whether Medicaid planning with an attorney is worth the expense, depends on how much could be saved or sheltered. If, for example, Medicaid planning will cost $10,000 but there is the opportunity to shelter $100,000 from long-term care expenses, it’s well worth doing for the $90,000 that would be protected. A $10,000 investment that returns $90,000 is a good investment, by anyone’s standards.

Talk to an estate planning or elder care attorney in your state, who can look at the specifics of your finances to see if you can benefit from their services.

Reference: nj.com (September 18, 2019) “Can a nursing home make me spend down an IRA before applying to Medicaid?”