How an IRA can protect nursing home benefits
Dear Len & Rosie,
My mom is in a nursing home because she needs more care than I can give her at home. After next month, she will only have her IRA to use for payments. She gets $471 in Social Security as her only income. This pays for her telephone, bills, going to dinner or a movie with a friend on the weekend, and other miscellaneous expenses. I was told when her money is under a certain amount, Medi-Cal will pay for her nursing home care. Before this happens, do we have to break her IRA to use to pay for the nursing home, or can Medi-Cal take over before that? Also what happens to her Social Security and any savings she has?
It’s good that you wrote us because many people in your mother’s situation would simply cash in their IRA or other retirement accounts when they don’t need to. Under the eligibility rules for Medi-Cal skilled nursing home benefits, your mother, assuming she’s not married, can have only $2,000 in non-exempt assets to qualify for benefits.
The term “non-exempt assets” is important, because there are many assets that don’t count for eligibility, and one of them is your mother’s IRA. Any retirement account owned by your mother doesn’t count against the $2,000 resource limit, as long as your mother is taking annual minimum distributions, which are required after she turns age 70 and a half, but can be started earlier if necessary.
Your mother should be eligible now if she has less than $2,000, not counting her IRA, her home, one automobile, her personal possessions, burial plot, and other miscellaneous exempt assets. If she’s a bit over the limit and hasn’t paid for her final expenses yet, she can buy a prepaid cremation or burial plan which won’t count against the $2,000 limit as long as it’s an irrevocable plan that she can’t cash in.
As for your mother’s income, when she qualifies for nursing home benefits, she will have a share of cost equal to all of her monthly income except for $35. Fortunately she’ll be able to use money from her retirement account to pay for the extra things she needs. If her retirement account runs dry, it’ll be up to you and the rest of the family to chip in to supplement the care Medi-Cal provides her.
If she qualifies for Medi-Cal benefits she should act to shelter her remaining exempt assets, because Medi-Cal will assert an estate reimbursement claim against whatever your mother owns upon her death. The IRA will be safe as long as she leaves it to named beneficiaries upon her death. If she owns a car, she should probably sign it over to one of her children sooner or later. If, however, she owns a house, then it’s very important for her to see an elder law attorney to talk about putting the home into an irrevocable trust to protect it from a future Medi-Cal estate claim.
Len & Rosie
Len Tillem and Rosie McNichol are elder law attorneys. Contact them at 846 Broadway, Sonoma, at 996.4505, or lentillem.com. Len also answers legal questions weekdays on The Len Tillem Show, a podcast available via iTunes, Facebook, spreaker.com and lentillem.com.