Nursing Home and qualified money
I have a client that will probably have to enter a nursing home for quality care due to his infirmities. My question is can the nursing home force him to assign his IRA account to them and can they make him take withdrawals greater than his annual RMD to cover the nursing home costs and force my client to deplete this account faster than required. His spouse is concerned that the nursing home will force my client to withdraw this IRA account to cover the nursing home expenses.
Additionally, since my client lives in a community property state does his spouse own 1/2 of his IRA account and can her share be reregistered in her name?
Permalink Submitted by Alan - IRA critic on Mon, 2016-08-08 18:08
Many states protect IRAs from creditors, but even in those states to qualify for Medicaid assets must be spent down including IRA accounts. A small balance for the surviving spouse is not subject to spend down. Therefore, a nursing home may not accept a patient who will not qualify for Medicaid as a result of not complying with the spend down rules. A community property state spouse has an equitable interest in 50% of the IRA balance, but they cannot have the account split up without a marital settlement per divorce. More than likely, a divorce triggered by nursing home needs presents a challenge and would have to be completed before the need for a nursing home was obvious. This situation likely varies by state.
Permalink Submitted by Ben Meyer on Tue, 2016-08-09 03:06
A nursing home can require a financial statement describing assets and liabilities, and many, if not most, will do so. They will do this to be sure that adequate funds are available to be spent down in order to qualify for Medicaid. But if they request an “assignment” of an IRA account to the nursing home, this is likely to be considered a prohibited IRA transaction. The result will be the disqualification of the IRA, as of January 1 of the year that the assignment is given, and loss of IRA status for the account. The IRA can be used for payment of nursing home expenses, even beyond the amount of the annual RMD, but distributions must be requested by the IRA holder, or his/her agent, on an ongoing basis.