IRA accounts and protection from creditors and Medicaid (nursing home)

Submitted by abraham boznick on Sun, 2018-02-11 21:12

1) Are there any states that protect IRA account from Medicaid (nursing home qualifications). I am specifically interested in California, NY, Washington, Florida, Texas. May be good link to that regard?

2) Are any of these states do not offer protection for IRA accounts in case of BK?
3) Is transfer of Roth 401(k) and after tax contributions into ROTH IRA treated any differently for BK/judgment protection?



Submitted by William Tuttle on Mon, 2018-02-12 01:57

I went thru this with my mother, but not in any of those states. 

  1. Generally retirement accounts are non-exempt assets unless they are in payout status with less than state maximums for states granting exempt status payout status. If the payouts qualify they are income that will mostly go to the nursing home, but that can protect the balance somewhat. It will require investigation to check those state’s Medicaid retiremnt plans policies.
  2. Federal bankruptcy protects IRA assets up to $1M inflation adjusted from 2005, currently $1,283,025. It is unlimited for assets rolled over from employer plans. IRA creditor protection is subject to state law. With several states (notably CA) limiting IRA creditor protections.
  3. Yes. 401k and other employer plans receive unlimited bankruptcy and creditor protection. Roth IRA assets rolled over from such plans receive the unlimited bankruptcy protection. However, Roth IRA creditor protection is subject to state law with several states including CA not offering any protection.

As you can see, at least from IRA creditor protection. CA is your worst choice for IRAs, especially Roth IRAs. You will always be better from an asset protection view to keep assets in an employer plan.

Submitted by abraham boznick on Thu, 2018-02-15 06:14

thank you. Just to clarify if I keep assessts in the employer plan — then state BK laws do not apply to assessts in employer 401k.

Submitted by Bruce Steiner on Tue, 2018-02-20 23:41

In some states, IRAs are not considered available for Medicaid, though the IRA owner has to contribute the IRA distributions toward his/her care.

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