Does the IRS or Medicaid treat my mother's Individual Retirement Annuity the same as her IRA?
I am my mother's POA. She suffered a major stroke and is 100% disabled in a nursing home. My elder care lawyer said cash in all her annuities and CDs, but leave her IRA as we attempt to get her on Medicaid. Now I realize she will get nothing from her Individual Retirement Annuity if I close it, and 2 payments if I leave open, which Medicaid will get. Can I leave it open?
While I concur that your mother needs to work with an experienced elder law attorney that specializes in Medicaid planning, there is an error that I would like to correct. Your mother's assets will be classified as either countable or exempt (depending on certain circumstances).
Countable assets include:
1. Cash value held in life insurance policies
3. Certificates of Deposit (CDs)
4. Savings accounts
5. Money market accounts
6. Checking accounts
7. Investments such as stocks, bonds, mutual funds, hedge funds, Exchange Traded Funds (ETFs), and other securities
8. Real estate
Currently, the amount of allowable countable assets is under $2,000. As long as your mother meets those requirements, she will qualify for Medicaid.
Exempt assets include:
1. Personal residence equity ($552,000 or less)
2. Prepaid funeral contract (up to $10,000)
3. Burial plots
4. Household goods (e.g furniture) and personal items (e.g. clothing)
6. Life Estate interests
7. Retirement accounts, including IRAs, 401(k)s, pensions, and similar
8. Medicaid compliant annuities
In regards to your mother's IRA, she must be receiving payments, such as a Required Minimum Distribution (RMD), or withdrawals that are in accordance with your state's Medicaid guidelines in order to be approved for assistance.
Keep in mind that each state treats retirement accounts differently. As such, it is advised that you consult with an attorney that has the appropriate knowledge and case experience.
If you have any further questions, I'd be happy to help.
Bear in mind, this can be a very complicated area so working with an experienced Medicaid attorney is smart. Some states have their own rules as well.
Generally speaking, if one is single, they are allowed to have no more than about $2,000 in countable assets. This would include, CD's, annuities, cash, retirement plans etc. If she has a home that is genrally not considered a countable asset.
If her IRA and other assets are over the $2,000 limit, she may not be eligble for Medicaid until she spends her assets down to that level.