RMD’s
We have a New York client ( age 64 ) with an IRA valued at $650,000.00. He was recently diagnosed with dementia and may soon be in need of assisted living care. The two homes owned by our client were put into a Medicaid Asset Protection Trust over 6 years ago and are protected from being considered countable assets.
As for the IRA, I am assuming that if we start taking RMD’s now and putting the account in “payout status”, Medicaid may not treat the IRA as an asset but rather as an income stream.
The Life Expectancy for a 64 year old I assume is 21.8. It then goes to 21.0 at age 65, then 20.2 at 66 and by the time he reaches age 70 the LE is 17. If he had waited to take RMD’s at age 70 , the LE would have started at 27.4
My question is, if we start taking RMD’s now, what LE table do we use when this client reaches age 70? Can we revert back the the more favorable tables as if we had waited to age 70?
I hope this makes sense. Thanks
Permalink Submitted by Alan - IRA critic on Fri, 2017-08-25 15:32
For RMDs to begin now, the IRA must be annuitized in a form (usually life or joint life annuity) acceptable under IRS Reg 1.401(a)(9)-6. The annuity payments become the RMD amount, so no annual RMD calculation is done. Medicaid eligibility varies by state and it is very possible that the definition of “pay status” does as well. Generally, I would think that annuitized IRA contracts are always considered in pay status, RMDs possibly considered as such, but just regular distributions taken for support likely do not attribute “pay status” to an IRA. You need to check with Medicaid planning experts in the applicable state. Even if the IRA is no longer a countable asset, the income test may come into play for the distributions. Again, RMDs cannot be started early unless the IRA is annuitized, and that action is irrevocable.