If I go to a nursing home, can the nursing home take the money in my IRA and use it to pay for my care?
No. Your annual minimum required distributions from the IRA must be spent on your nursing home care. But the IRA principal is exempt from claims from the nursing home and from Medicaid.
Similar rules apply to 401(k), 403(b) and 457 accounts — and even to Roth IRAs, if you're a Medicaid nursing home beneficiary. Medicaid requires you to spend a minimum annual Roth IRA distribution based on your life expectancy on your care, even though tax law doesn't mandate Roth distributions.
But although your retirement account principal is protected, Medicaid requires bigger annual minimum distributions than the Internal Revenue Service. As a result, you must empty your IRA faster if you're a Medicaid beneficiary.
The IRS actuarial table that determines required distributions from tax-deferred retirement accounts uses joint life expectancies even for individuals who aren't married. The Medicaid actuarial table uses single life expectancies for everybody. Single life expectancies are shorter than joint life expectancies — and the shorter your assumed life expectancy, the larger your required distribution.
For example, the IRS unisex actuarial table gives an 84-year-old man or woman a 15.5-year life expectancy. The Medicaid actuarial table gives an 84-year-old man a 6.06-year life expectancy and an 84-year-old woman a 7.26-year life expectancy. So for federal income-tax purposes, an 84-year-old woman with a $100,000 IRA has a $6,452 required minimum distribution ($100,000 divided by 15.5). But as a Medicaid nursing home beneficiary, she'd have to take a $13,774 annual distribution ($100,000 divided by 7.26) to spend on her care.
The bottom line IRA principal is sheltered from creditors, but annual distributions are not.
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