Can A Nursing Home Take My $250,000 IRA, Savings Account, Home, Car Or Other Assets?

Many older Americans share the common worry: what happens to my hard-earned savings, Individual Retirement Account (IRA), or even my home if I need long-term care in a nursing home? The fear of losing these assets is a natural part of preparing for the unpredictable aspects of aging, including potential long-term care needs. 

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Nursing homes don’t directly seize your possessions to pay for care. However, the costs associated with long-term care can be significant, and covering them can feel like your assets are diminishing rapidly. Understanding how these costs are paid for is crucial to protecting your financial security while ensuring you receive the necessary care.

Medicaid Asset Caps

Asset caps for long-term nursing home care vary significantly by state, but generally, individual applicants must maintain assets below a specific threshold to qualify. For programs like Nursing Home Medicaid and Home and Community Based Services (HCBS) Waivers, the individual asset limit is $2,000 in most states. However, some states have higher allowances. For instance, New York sets the limit at $31,175 for individual applicants.

For couples, the asset limits are different and can be influenced by whether one or both spouses are applying. Generally, the asset limit for couples is higher, and if only one spouse is applying, certain resources may not count towards the Medicaid eligibility limit. This is due to the Community Spouse Resource Allowance (CSRA), which allows the non-applicant spouse to retain a larger portion of the couple’s assets, sometimes up to $154,140 depending on the state.​ 

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Types Of Assets

Assets that Medicaid typically considers when determining eligibility include cash, bank accounts, and additional financial investments. However, some assets are exempt from being counted, such as the applicant’s home (if certain conditions are met), personal belongings, one vehicle, and specific types of life insurance and burial trusts‹.

Specific rules, like the look-back period, also play a crucial role. This rule scrutinizes asset transfers made within five years before applying for Medicaid to prevent individuals from reducing their countable assets to meet eligibility criteria. This can result in penalties and delayed eligibility​

IRA Protection

The federal government does not set specific regulations regarding the protection of IRA assets from nursing home costs. If you are not taking required minimum distributions, your IRA may be treated as a nonexempt asset, potentially affecting your Medicaid eligibility. Although your IRA won't be automatically seized to cover nursing home expenses, its value could be included in the determination of your asset level. It’s important to consult your state’s laws as they vary and will define how Medicaid views your IRA about eligibility, income, and asset types.

In many states, IRAs are considered when assessing Medicaid eligibility. The impact may also hinge on whether you are currently withdrawing from your IRA. Generally, there is a provision to preserve a portion of your IRA for the benefit of a spouse or another beneficiary, depending on state-specific regulations.

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Status of Your Primary Residence

Your primary home is generally protected under Medicaid rules if your spouse or a dependent relative lives there. However, the state can recover costs from your estate after your death, which might include the value of your home, depending on the circumstances and your state’s laws.

Rules Regarding Vehicles And Personal Possessions 

Regardless of the value, one vehicle owned by the Medicaid applicant is typically exempt and does not count toward the asset limit. 

Beyond vehicles, personal belongings like household goods, personal effects, and other possessions are generally exempt, as long as they are within reasonable limits. Luxury items or valuable collections may be counted as assets. Again, the specific rules and exemptions can vary by state,

Asset Recovery

Medicaid can recover the costs it has paid for an individual’s care from their estate after their death, which might include forcing the sale of assets like the home if it’s not protected by certain conditions (like being occupied by a spouse or dependent relative). However, typically, Medicaid does not force the sale of assets like cars during the individual’s lifetime; assets are assessed for eligibility at the time of application

Methods Of Protecting Your Assets

When planning for potential long-term nursing home care, there are several asset protection strategies you can consider to ensure you meet Medicaid’s eligibility requirements without significantly depleting your resources:

• Irrevocable Funeral Trusts: These are specifically designed to pay for funeral and burial expenses. By setting aside funds in an Irrevocable Funeral Trust, you can reduce your countable assets, as these funds are not considered by Medicaid when assessing asset limits. This move not only helps with Medicaid qualification but also alleviates the financial burden on families for funeral expenses‹.

• Spousal Asset Transfers: If only one spouse needs nursing home care, the other spouse (community spouse) can retain a significant portion of the couple’s assets without affecting Medicaid eligibility. This is known as the Community Spouse Resource Allowance (CSRA). The amount allowed varies by state, but it’s designed to prevent the impoverishment of the spouse who remains at home.

• Medicaid-Compliant Annuities: For couples, turning a large amount of assets into an annuity that provides a steady income stream for the non-applicant spouse can be beneficial. These annuities must be irrevocable and payout by the recipient's life expectancy, and they help in reducing countable assets to qualify for Medicaid.

• Medicaid Asset Protection Trusts: These trusts can be set up to protect assets from being counted toward Medicaid’s asset limit. By transferring assets into such a trust, you can shield them from being considered for Medicaid eligibility and preserve them for heirs. However, these need to be established well before applying for Medicaid due to the five-year look-back period that penalizes transfers made to circumvent spending down assets.

• Purchasing Long-Term Care Insurance: Investing in long-term care insurance early can safeguard your assets from nursing home costs. Some policies even offer life insurance benefits that can be used for long-term care if needed, providing flexibility and asset protection.

The Importance of Legal and Financial Planning

Understanding Medicaid and asset protection can feel overwhelming. Consulting with an elder law attorney familiar with your state’s laws is crucial. They can provide clear and tailored advice to ensure your assets are safeguarded before you need to enter a nursing home.

Financial advisers can also be invaluable partners. They can help you explore options like long-term care insurance to further solidify your financial security.

By working with these professionals, you can develop a straightforward plan that protects your assets, maximizes your benefits, and allows you to focus on what matters most — your health and well-being.

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*This information is not financial advice, and personalized guidance from a financial adviser is recommended for making well-informed decisions.

Jeannine Mancini has written about personal finance and investment for the past 13 years in a variety of publications including Zacks, The Nest, and eHow. She is not a licensed financial adviser, and the content herein is for information purposes only and is not, and does not constitute or intend to constitute, investment advice or any investment service. While Mancini believes the information contained herein is reliable and derived from reliable sources, there is no representation, warranty, or undertaking, stated or implied, as to the accuracy or completeness of the information.