Medicaid Could Cost You Your IRA

[intercst]

It's either that or divorce....

http://www.cbsnews.com/stories/2005/03/30/eveningnews/main684129.shtml

Colorado is one of 20 states that now claim at least part of the IRAs and other pensions of healthy, retired spouses, like Ken, before giving up any Medicaid dollars. It's a new concern for America's 77 million baby boomers who were told to invest in IRAs and 401Ks that would see them through old age.

Critics say Colorado's law, and others like it, discourage savings and scare people away from retiring and are anti-marriage because only spouses are penalized.

Ken Walker says he even considered getting a divorce, but he couldn't.

"That's for some people but that's not for Ken Walker," he says.

Instead, he had to liquidate his 401K. Colorado left $95,000 in his IRA for him to live on for the rest of his life.

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intercst

 

[gayl]

That's because Medicaid is a form of welfare intended for those unable to pay for their own healthcare, which is why self-insuring can be hazardous to your IRAs. Which is also why I carry full health insurance.

 

[Mr._johngalt]

I am 60 years old. So far I have never lost a fight over significant money. I tend to think I can outwit whatever
dopey stuff gets thrown at me. I know it's not literally true. It's a visceral thing. So, I may get beat, but believing I will not makes me a formidable adversary.

JG

 

[smooch]

I've brought this up here before. In Maryland the amount you can keep is 90K. I've asked AARP if any legislation is being considered to protect 401(K) and 403(B) accounts. The answer was no. I've written to my congress woman - no response. I don't see the fairness of this, because if a person has a pension, that money cannot be taken away. Those of us who have 403(B)s have them because no pension is provided. I also don't understand why, if I contribute the maximum to my 403(B) each year instead of spending it now, why should I end up in the same position as someone who spends it now instead of saving it? I don't mind having medicaid take the money once the second spouse needs nursing home care, but not while one spouse still needs to have a decent income.


The article suggests that other states will implement laws allowing Medicaid to take the retirement assets of a healthy spouse. I believe this is already the law in every state. If there is a state where it isn't, I want to move there. New York does allow "spousal refusal". I am hoping that, when more people realize what the law is, they will demand that the practice be changed.

 

[uncledrz]

I've brought this up here before. In Maryland the amount you can keep is 90K. I've asked AARP if any legislation is being considered to protect 401(K) and 403(B) accounts. The answer was no. I've written to my congress woman - no response. I don't see the fairness of this, because if a person has a pension, that money cannot be taken away.

This is an excellent point, especially since I have no pension and will have to fund retirment from IRA/401K and non deferred assets.

The government is not rational. It does not treat all citizens equally. Changing the rules is one way. Play inside the rules is another.

How about converting deferred assets to a fixed annuity. I know some medicaid rules will allow an income producing asset to be considered differently than a non income producing asset.

With the present financial status of the federal and state governments, it appears that in the future the medicaid rules are going to get much more restrictive.

 

[Mr._johngalt]

Hello uncledrz! If you are looking for fairness and
uniformity (or even common sense) in government rules and regulations, you are doomed to disappointment.
I take the opposite approach, i.e. I expect to be
disappointed and my expectations are met close to
100% of the time.

JG

 

[azanon]

I am 60 years old. So far I have never lost a fight over significant money. I tend to think I can outwit whatever dopey stuff gets thrown at me. I know it's not literally true. It's a visceral thing. So, I may get beat, but believing I will not makes me a formidable adversary.

I wish i could run into more people like you during work. Normally, its no challenge for me. I actually get excited when clients hire a lawyer. Most of the time, I still get my way, but at least it was challenging in the process.

 

[unclemick]

The government can change the rules - when they need the money.

Ask a Korean war vet about his ??health benefits??

Growing up on the West Coast - the 'chinese solution' was to make assets 'invisible'.

 

[azanon]

To the original poster, I have little sympathy for someone with a massive IRA but no health insurance.  Much better to have a smaller IRA, but a full health insurance policy.  Its practically impossible to find a credible financial help book at the bookstore that would actually recommend you not have a full health insurance policy at all times.    

Of all the insurances to have, health is easily the most important and the last one, one should go without.  Just one major health catistrophy without a solid health insurance policy could wipe someone out.

A great itemizied test for whether one is ready to ER is whether you can afford a health insurance policy retired. If not, you know for sure you can't afford it yet.

 

[Mr._johngalt]

I agree with much of what azanon has posted.
However, I also think that "going bare" is just
another "risk" decision in ER. I haven't done it myself, but
I understand why a person might do it. Normally
at this point I would quote Al Pacino, but even I can see
I have overused that line

JG

 

[indymom]

The government can change the rules - when they need the money.

Ask a Korean war vet about his ??health benefits??

Growing up on the West Coast - the 'chinese solution' was to make assets 'invisible'.

Invisible how? And how is this a "chinese solution?"

 

[cute fuzzy bunny]

Huge chinese population in california...we have a Bok Kai festival here in Yuba City every year and some of the oldest preserved homes are from early chinese settlers.

Paperless banks...you give your money to a group of people who "do something with it" and remember how much money you have, but no paper changes hands...hence no paper trail. And you make sure you do this with a very young 'banker' who is likely to retain his eidetic memory a little longer...

 

[unclemick]

Gold. precious stones, and jade. Busineses and other paper trail assets in someone else's name.

The later has Godfather implications - make sure it's someone you are in a position to make an offer they can't refuse.

The loophole of family heirlooms and jewelry has been abused so much of late - courts will sometimes take the money via forced sale anyway.

Also with IRA - you get hosed on taxes with big moves(except Roth).

Again - the general rule is if you own it or control it - Medicaid is first in line - in many/most states ahead of your will if they think there is money to recover.

Again - one place where qualified lawyer can help - provided you are 5-10 yrs before the events take your options away.

One thing - the average lawyer doesn't have a clue how to shelter assets - at least the ones I found in the yellow pages.

I coughed up $187 several years ago and went with an Oregon company I found on the internet.

 

[Martha]

UncleMick, many lawyers stay away from Medicaid planning because they run the risk of a Medicaid fraud claim being made against them personally. The rules are very tough on lawyers.

 

[unclemick]

Actually there some ways to save some of the assets in an IRA - state specific rules, taxes, and triggering look back provisions require timely and precise moves by the individual - a lawyer can't do it for you.

The lawyers role is limited - and as suggested probably not worth the level of pain/punishment for a misstep.

 

[Roger_R]

To the original poster, I have little sympathy for someone with a massive IRA but no health insurance. Much better to have a smaller IRA, but a full health insurance policy. Its practically impossible to find a credible financial help book at the bookstore that would actually recommend you not have a full health insurance policy at all times.

Of all the insurances to have, health is easily the most important and the last one, one should go without. Just one major health catistrophy without a solid health insurance policy could wipe someone out.

A great itemizied test for whether one is ready to ER is whether you can afford a health insurance policy retired. If not, you know for sure you can't afford it yet.

I think that many of the folks requiring the use of Medicaid to cover health care costs are those facing huge bills for rest home and long term care. Few would argue the wisdom of health insurance, but the crowd is probably split on LTC insuance.

While the rules for Medicaid do seem a little unfair, it is basically an arrangement where the Government is paying for our welfare. I don't know that it is especially unreasonable to treat an IRA diffently that other retirement incomes such as real estate rentals. Medicaid is basically there to provide healthcare for those who other wise can't afford it. It isn't so much the rules about a 401K/IRA that are the issue, but the basic concepts of how we expect the tax payers to care for us when are no longer able to do so for ourselves.

 

[smooch]

UncleMick2, could you share what some of those moves might be?

 

[Mr._johngalt]

Yeah unclemick, please share Seriously, I spent a lot of time on this (sheltering assets) and came up pretty much empty. Could
be because I don't have enough for anyone to bother
talking with me.

JG

 

[unclemick]

Sorry

Murphy's law - last night a close friend of the family died - age 44(back surgery, ? blood clot/heart attack?).

The mother is legally blind so we are will be involved in the planning/paperwork/funeral cycle. and will be out of pocket briefly.

I coughed up $187 and used medicaidhelp.com out of Grants Pass Oregon. Widowed mom, no house, staged gifting and LA private pay factor - our plan is simple AND YET TO BE TESTED since she is home with us.

Total assets/your state's private pay factor is the key metric. Family cooperation is essential. Once you are there, all the the options are odious - but some assets can usually be saved. The article is misleading in that you have some rights with your own assets/IRA included.

 

[Michael]

The article spoke of 24 hour home care nursing, which is often not covered under standard medical insurance.  Nursing home coverage with a home care option would be needed to insure against this eventuality, in addition to the health care policy.  I don't think Medicare covers this either, so you would need to keep the policy after age 65.

Except for those who have enough to cover the 72K per year in addition to their current expenses.

 

[gayl]

How about converting deferred assets to a fixed annuity.  I know some medicaid rules will allow an income producing asset to be considered differently than a non income producing asset.

It is my understanding {I had 10 yrs as a county ombudsman in CA} that an irrevocable annuity would not be considered when determining liquid assets and assets that could become liquid, just as you can exclude the value of most personal belongings, one home, and one car. All other items that can be sold are considered and Medi-Cal [CA's version of Medicaid] is only concerned if the value goes over 3k / 90k if placement in a SNF is needed.

Folks, this is intended as a safety net for those who do not have financial resources available to them for their medical / custodial care. I do not believe that any of us fall into that classification. Otherwise, we would not be FIRE'd ... we would be at work. Once you hit Medicare age years from now, then you get 100 days SNF care per hospitalization ... renews after 60 days out. So there is relief there .... otherwise plan well. It can be a retirement breaker

 

[Janie]

Still seems to me that it's lack of health insurance that's costing this person their IRA. But it's another argument for holding onto traditional SS benefits so that all of us have a fall-back that can't be taken away by medical bills.

 

[smooch]

I disagree that it is a lack of health insurance. Health insurance does NOT pay for nursing home care. You must self pay or have LTC insurance.