What Happens If Your Spouse Needs a Nursing Home?

What happens if your spouse enters a nursing home? What assets are protected for you?

 Medicaid (also referred to as “Title 19”) is a joint federal-state program which provides funding to cover the costs of nursing home for individuals who meet certain income and asset requirements. The rules vary from state to state and are very complex.  You may have heard bits and pieces about this program but chances are you have either received incorrect or incomplete information.

An example of this relates to IRA accounts. You may have been told that all financial assets are countable and your spouse’s IRA must be spent on his care with no way to preserve your spouse’s IRA to benefit yourself. This is wrong. There are many planning opportunities available to preserve assets even after your spouse has entered the nursing home.

The spouse who lives independently is the Community Spouse. The spouse who is going to reside in the facility is the Institutionalized Spouse. In years past, the only option with IRAs, in the context of Medicaid planning, was to cash it in and pay the taxes. This has changed. Planning opportunities now exist which allow you to protect the IRA of the Institutionalized Spouse while eliminating the necessity of cashing it in. In addition, the income flow of the IRA can benefit the Community Spouse.

The Community Spouse’s IRA is exempt, meaning it is completely ignored for Medicaid purposes, and does not have to be spent on the Institutionalized Spouse’s care. The Institutionalized Spouse’s IRA is countable, however it can be converted to a Medicaid Compliant Annuity that is payable to the Community Spouse thereby preserving that asset.

If you or your spouse have an IRA and are struggling with long term care issues, I encourage you to seek advice prior to taking any drastic measures with your IRA accounts. It is important to plan before the crisis.