Warning: An Elderly Couple That Had Each Other’s Names as Beneficiaries on their IRAs and Retirement Accounts Destroyed Their Medicaid Eligibility!

I was recently speaking with a wonderful couple following one of our educational events in Hendersonville, Tennessee. This couple asked me several questions following the educational event. Specifically, this family was concerned about nursing home expenses in the future and having to spend their entire life savings on their future nursing home expenses. However, this husband and wife couple had attended one of my educational events and understood that they could put an Irrevocable Medicaid Trust in place at least five (5) years before nursing home expenses began, and if they did so, they could shield their assets from Medicaid spend down, Tennessee’s estate recovery rights, and still qualify for Medicaid if they enter into a nursing home. However, this couple had questions about their IRA accounts and their investment accounts.

Specifically, this family had questions on if they put an Irrevocable Medicaid Trust in place, why then they couldn’t just put beneficiary designations on their investment accounts and IRA accounts. I explained to this couple that the risk with this type of planning is that it can destroy your Medicaid eligibility. I explained to this husband and wife couple that when you create an Irrevocable Medicaid Trust and transfer all of your assets into the name of the trust, the purpose is to get your assets out of your name and into the name of the trust five years before nursing home expenses begin so that you can preserve your assets from Medicaid spend down should you go into a nursing home.

I continued to discuss with this couple that you spend all this time planning your estate to avoid Medicaid spend down, and one wrong move, such as putting a beneficiary designation outright to a spouse, could destroy all of that careful planning. I explained that if you put an Irrevocable Medicaid Trust in place more than five years ago, and then the first spouse passes away leaving, for example, a $500,000 IRA to the surviving spouse, that is going to be a $500,000 asset for nursing home purposes. Therefore, if that surviving spouse later goes into a nursing home, let’s say, a year later, that surviving spouse is not going to qualify for nursing home expenses because of the $500,000 IRA he or she inherited from the deceased spouse.

For this reason, I explained to this couple, that many of our clients who set up an Irrevocable Medicaid Trust, name the Trust itself as the beneficiary of the IRA or the investment account. This way, when the first spouse passes away, it simply goes into the name of the Irrevocable Medicaid Trust and the issue of the surviving spouse qualifying for Medicaid is never an issue, so long as the trust was created and funded at least five years before nursing home expenses began. To say the least, this couple was relieved that they could engage in planning right now to protect their assets from nursing home spend down and provide for their loved ones.

If you have questions about estate planning in Tennessee, establishing a revocable living trust or an irrevocable Medicaid trust, avoiding nursing home poverty and Medicaid planning, or any other estate planning topics, then I encourage you to attend one of our free live educational events scheduled this month. At these events, you will hear a lot of real life stories about families that paid thousands of dollars in unnecessary expenses, families that were able to avoid unnecessary expenses, and families that were able to protect their assets from unnecessary nursing home costs and expenses.

I look forward to speaking with you at one of our upcoming live educational events!

Be the first to comment!
Post a Comment