IRAs and Medicaid in Indiana Bad News for Married Couples

The Indiana Medicaid Office has announced they will postpone the implementation of a drastic change to the Medicaid rules regarding retirement assets of a Community Spouse, set to occur on July 1, 2020.

On March 26, 2020, the Indiana Family & Social Services Administration announced that the retirement accounts of a Community Spouse will be included as an available resource in determining an Institutionalized Spouse’s Medicaid eligibility. This law change was set to occur on July 1, 2020.

This major law change in Indiana WILL NOT OCCUR on July 1, 2020. However, this does not mean retirement accounts owned by the Community Spouse are fully protected. The State has indicated they intend to proceed with this change under the rule promulgation requirements.

So, let’s put this into a practical example: Roy and Jane are married. Roy has a stroke, goes to the hospital and then to the nursing home. The first day he enters an institution and is there for more than 30 days is called a snapshot date under the Medicaid rules. The assets held by the couple on the snapshot date determine how much of the couple’s combined resources that Jane gets to keep so she has enough funds to live on.

This happily married couple owns a home worth $60,000, and a 2006 minivan. They have $20,000 in savings; two small life insurance policies with a total cash surrender of $4,000; and Jane has $50,000 in an IRA. Jane gets to keep one-half of their combined resources, subject to a minimum of $25,728 and a maximum of $128,640.

Under the current Indiana Medicaid rules, Jane’s IRA does not count as an asset, and Roy can be immediately eligible for Medicaid. Their minivan, the house and Jane’s retirement account are considered exempt assets. Their assets and the cash from the life insurance are less than $25,728, Roy is immediately eligible for Medicaid in the nursing home or for waiver services.

Under the proposed rules, Jane’s IRA could be countable, meaning that Roy & Jane now have countable resources of $74,000 and Jane gets to keep one-half, or $37,000, and must reduce their countable resources below this level to make Roy eligible for Medicaid for nursing home care or waiver services.

With the cost of nursing home care averaging $7,500 per month, or $90,000 annually, Jane is worried to death about her future. She immediately needs to consult an elder law attorney for advice.

With the uncertainty regarding the State’s treatment of retirement accounts, there is no better time to revisit your estate plan to ensure you are fully prepared for the cost of long-term care.

Please visit our website at www.dhblaw.com and read our booklet “Planning for the Cost of Nursing Home Care” for more information.

Respectfully Submitted,
Michael J. Huffman
June 2020