The rules regarding IRAs and Medicaid (Medi-Cal in California) are complicated and vary from state to state. You should talk to your attorney about your IRA to determine the best course of action for you.
There are some strict financial rules governing eligibility to receive Medi-Cal benefits. Sifting through these rules is an important first step in determining if you are able to receive the aid.
Here is an important question to ask: “Can an IRA Affect Medicaid Eligibility?”
ElderLawAnswers posed and answered this question, noting that the greatest asset many of us will own throughout our lives and well into old age will be our IRA or other retirement account. That said, just because you have the account doesn’t mean it can or will pay for the needed care. No, in the end you might need Medi-Cal. However, the mere existence of the IRA may cause you some trouble getting into the program.
So, can an IRA affect Medi-Cal eligibility? The short answer is that “it depends.” It depends upon whether or not the IRA is in “payout status” (i.e., are taking minimum required distributions?). This might actually work differently than you’d expect. If your IRA is in payout status, then you might be in the clear.
Medi-Cal allows you to have some income for personal use, after all. As a result, the payout from an IRA might be so small as to not cross the Medi-Cal income threshold and larger amounts will simply go to the nursing home until reduced to the small personal expense amount.
If your IRA is not in payout status, however, then the IRA is non-exempt and can be held against you, potentially to full value. What to do with the IRA depends upon state law and the possibility of transfer versus cashing-out. Either option may not be pretty or productive.
With proper planning beforehand you can help ensure that your assets won’t accidentally trigger a problem. IRAs can be tricky. Much of what you should do will depend upon your needs and your assets, with more than a little hanging on state law. Interpreting the relevant laws can mean a world of difference, so seek competent Elder Law counsel in structuring a plan.
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Reference: ElderLawAnswers (March 28, 2014) “Can an IRA Affect Medicaid Eligibility?”