I'm 68 years old and have a 401(k) account. If my husband or I needed to apply for Medicaid to enter a nursing home, how would it affect my 401(k)? Being younger than 70½, I don't yet have to take required minimum distributions. Is the 401(k) a protected asset?

Your 401(k) principal is an exempt asset if the account is in payout status — i.e., if you're taking monthly distributions based on your life expectancy. You can protect the account at any age by taking such distributions.

Those distributions are deemed available to pay for your nursing home care; but your husband might be allowed to keep them, depending on his income, says Esther Zelmanovitz, a Great Neck elder law attorney. When Medicaid pays for a person’s nursing home care, his or her spouse — aka "the community spouse" — is limited to $3,090 of maximum monthly income. The nursing home spouse's income can be used to bring the community spouse's monthly income up to that $3,090.

What if your husband is the Medicaid applicant? Married couples are responsible for each other, so your 401(k) distributions would be deemed available to pay for his nursing home care. But federal law gives you the right to refuse to pay for it — and elder care attorneys almost always advise clients to assert this right. The law is intended to ensure that community spouses aren’t reduced to living on public funds. Your spousal refusal would let you keep more money to live on without disqualifying your husband for Medicaid. Medicaid would have the option to sue you to recover what it spends on his nursing home care — an option the agency may or may not choose to exercise.

The bottom line

Retirement accounts in payout status are exempt from Medicaid eligibility tests.

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