Must I Liquidate the Money in My IRA and Spend it Down for Care, Before I Can Apply for Medi-Cal?

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Do the rules permit a nursing home to force a resident to liquidate an IRA and spend it down to pay for care, before they’re eligible for Medicaid (Medi-Cal in California)? Likewise, can a nursing home make the spouse who’s not in a nursing home liquidate money in 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, while in California, the answer to both of these questions is no, the answer for those in New Jersey 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 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 Med-Cal planning attorney, you can implement a strategy to preserve the spouse’s IRA up to a maximum of $126,420 for 2019. Your Medi-Cal 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.

Whether Medi-Cal planning with an attorney is worth the expense, depends on how much could be saved or sheltered. If, for example, Medi-Cal planning will cost $10,000 but there is the opportunity to shelter $100,000 or more 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?”