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Home > Blog > Estate Planning > 401K And IRA Considerations When Planning For Medicaid: How Can You Keep These Accounts And Still Qualify?

401K And IRA Considerations When Planning For Medicaid: How Can You Keep These Accounts And Still Qualify?


If you or a family member are planning for Medicaid coverage and eligibility, the process can seem overwhelming at first. Since Medicaid is a needs-based program that reviews an individual’s income and assets, many wonder: how do I even qualify? You may have heard stories about others spending themselves into poverty just to get nursing home care covered by Medicaid.

For those with 401Ks and IRAs, the question of Medicaid eligibility gets more complex. States set their own rules and requirements, so eligibility guidelines in New York may differ from those for your family member in another state. Adding to the confusion regarding 401Ks and IRAs are the type of retirement savings plan, payout status, payout amount, one’s other income and assets, and marital status.

New York Guidelines for Retirement Accounts and Medicaid Eligibility

In New York, retirement savings plans are considered by Medicaid as either income or an asset when determining eligibility for long term care. There is an exception, however, if the accounts are in payout status. “Payout status” means that you are taking at least the required distribution out of your plan on a monthly basis. However, the monthly payments are counted as income. If one’s payout, plus their other income (such as Social Security) is over the income limit, they will likely be ineligible for Medicaid. For New York in 2022, the monthly income limit for Medicaid eligibility for a single person is only $934.00/month. This monthly cap can seem shockingly low for some, and monthly payouts could easily put one over the limit.

Another option, aside from putting an account in payout status, would be to cash out funds, pay the income tax, and transfer these funds to an exempt trust. This can avoid having to “spend down” retirement funds for Medicaid eligibility. This is one way to address Medicaid coverage and long-term care needs while also protecting valuable assets for your beneficiaries.

In some long-term care situations, meanwhile, it may benefit your heirs to leave a retirement plan in payout status, and allow the nursing home to collect from the payout income. After death, beneficiaries could then withdraw the balance in a lump sum or through installments.

When and How to Review Your Retirement Accounts and Medicaid Eligibility Options

As you can see, these are just among a few ways to address the problem of balancing 401K and IRAs with Medicaid eligibility. Preserving your hard-earned assets while also planning for necessary long-term care is an increasingly complex maze to navigate, and you don’t want to go it on your own.

Whether you are just starting to consider these options or are in the middle of the process, it is never too late to seek experienced legal guidance. At Cavallo & Cavallo, we are knowledgeable and experienced Bronx & Westchester Medicaid & Nursing Home attorneys, helping people throughout New York City and all of Westchester County access benefits for nursing home or community Medicaid while also protecting their family’s assets.

Our Nursing Home and Medicaid Attorneys Can Help You Today

At Cavallo & Cavallo, we are known for providing trusted legal assistance in these matters, and guiding families toward solutions that can address long-term care needs while preserving financial assets for clients and their families. Most importantly, we can carefully review your individual financial accounts and personal wishes to customize a plan best fitting your goals.

To discuss how retirement plans such as 401Ks and IRAs can affect your Medicaid eligibility, call or contact our Bronx & Westchester estate planning attorneys online and request a consultation in our office today.

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