Florida residents who are faced with the need for long-term care are often put into a precarious financial position. For many, the average monthly costs associated with that care are simply too much to bear without financial assistance. With nursing home care now averaging more than $200 per day, few seniors can comfortably manage the costs without effectively impoverishing themselves. This can be an especially troublesome problem for seniors whose savings and investments leave them unable to qualify for programs like Medicaid, but remain insufficient to cover their long-term care costs. The question then is how someone with 401k investments can manage those assets in a way that ensures Medicaid eligibility.
Your 401k Investments: Large Assets Need to be Managed
Qualified retirement accounts are among the top-performing retirement vehicles owned by the average worker in the United States. IRAs and 401k accounts can help you to amass a sizable amount of wealth during your working years, and can be one of the best ways for the average Floridian to save the type of money needed to fund a comfortable retirement. The problem with these investment assets becomes clear when complex health care needs enter the equation.
While that money you managed to amass through your IRA investments might be of tremendous aid in your efforts to maintain your retirement standard of living, you’ll quickly discover that it’s less impressive when you suddenly need long-term nursing care. In most cases, you’ll end up having to use your entire retirement savings to pay for your nursing home care, or end up forgoing the comprehensive care you need just so you can hold onto your hard-earned wealth.
Medicaid is the one solution that you should be able to rely on for help, but its special eligibility requirements can make it difficult to access when you have any real assets to your name. After all, Florida Medicaid requires applicants to own less than $2,000 in countable assets, and maintain an income that is no more than $2,100 each month. The problem for many seniors is that the 401k assets are deemed to be “countable assets” when it comes to determining program eligibility – and that can leave 401k account holders unable to qualify for the benefits they need.
These Assets Need to be Converted to Non-Countable Assets
Elder law attorneys who deal with senior assets and Medicaid eligibility concerns all share at least one common goal: the need to help their clients convert countable wealth into non-countable assets. The strategy is always the same, and involves using a variety of tools and planning techniques to ensure that Medicaid doesn’t consider those assets when it is determining eligibility for nursing home benefits. When it comes to dealing with a 401k account, there are two basic options that these attorneys can help their clients use:
- The first option involves a carefully-timed plan to place the account into its payout status, which enables you to begin withdrawing the required minimum distribution, or RMD. This has to be coordinated properly to enable the account to be viewed as a non-countable asset, since the withdrawals that you take have to be consistent with the IRS charts covering life expectancy, and must comport with the Florida Medicaid life expectancy tables as well. If done properly, the account is no longer considered an asset for Medicaid purposes.
It will, however, now be counted as income – and that usually creates another problem that must be overcome, since the program has such a strict income requirement. An elder law and Medicaid planning attorney can help you to protect that income in a Qualified Income Trust – otherwise known as a Miller Trust. Of course, there are times when this strategy could result in early withdrawals that incur a penalty – but those penalties are much less than the cost of nursing home care, and a small price to pay for the opportunity to save thousands of dollars a month in long-term care costs.
- The second strategy is even simpler, though it too could result in early withdrawal penalties. With this strategy, you simply liquidate your 401k account, and either spend down the proceeds or use a trust or annuity to protect them from being counted by the Medicaid program. Like that first option, this one relies on using simple strategies to convert the 401k into liquidated assets that can then be redirected in ways that simply make them disappear.
Of the two, many people prefer the second option best, since it allows them to avoid using the proceeds from the account to pay nursing home costs. Instead, assets are used in ways that can help to supplement the senior’s lifestyle and reduce their dependency on government. For residents who are near the end of life, however, it can often be better to utilize the Miller Trust option – even though that will require that payouts be used to finance nursing home care. The remainder of the account can then go to the senior’s heirs when he or she dies.
All of that can be difficult to determine, however, without the help of competent legal counsel. That’s where an experienced estate planning and elder law attorney can be an invaluable resource for the average senior applicant. Your attorney can help you to evaluate your current financial circumstances, analyze your 401k investments account to determine your best options, and help you to move forward with your asset conversions for Medicaid planning.
At Kulas Law Group, P.A., our elder law experts will assist you in your efforts to obtain Medicaid eligibility by properly managing your 401k investments and other retirement assets. We can help you to better understand how different decisions could impact your eligibility, and enable you to avoid many of the most common Medicaid planning mistakes other seniors often make. If you’d like to learn more about how we can help you better manage your retirement accounts for your nursing home needs, contact us online or call us at (772) 398-0720 now.