Financial Planning, Medicaid, IRAs, 401ks, and healthcare costs.

I know this is a little off topic. My mother has cancer and has a IRA account with a little over 50k. She has Medicare and insurance. My mom recently wanted to apply for medicaid, but if she does they will probably take her IRA money. She wanted to use this IRA money for burial costs, grand children college tuition, and leave some money for her children (me). I’m not sure if it is possible to do this and get medicaid at the same time? Is it possible? What would you guys suggest? I’m not sure if she stays with medicare and insurance, if these two plans would cover everything in her treatment until her death? My thinking is that it won’t and we would have to use some of her IRA money to cover the costs anyway. Thank you for your help.

I am sorry to hear your mother has cancer, CFAdummy. I lost my mother-in-law this year to the same disease. I wish you a positive outcome. What you are talking about is possible (though it may be difficult with an IRA). Elder care attorneys can help in this area. Basically she has to get the IRA out of her name using a trust (so she has no assets in her name). There is a “look back” period though, so if she is trying to get Medicaid soon transferring the assets to the trust won’t get the job done. The typical look back period is 1 year, but can be as long as 5 years. I believe this is determined at the state law level. Be aware that the area of medicare planning is controversial. The idea behind medicaid is to pay for medical care for those than can’t. In cases where the family actually has assets they are shifting the costs of care from their assets to the US citizens. I think your best bet would be to search elder care attorneys in your area. Good luck.

its my understanding that she will need to spend down those assets before qualifying for medicaid. There are limits on asset levels and what you can own (ie-1 auto, 1 home, etc). mwvt9 already covered the lookback period (which I think is 5 years?), so obviously just moving assets out of her name won’t help. I think she can, however, continue to gift every year, though not positive. Federal gift limits apply, but she can get rid of 50k somewhat quickly in that case (or she can cash out her IRA and “spend” it all…and maybe that “spending” ends up with you somewhere to make sure you can take care of her wishes). Sorry to hear it, good luck with it all. I’d also note that using medicaid might not afford her the same treatment or lifestyle she may want to have by subsidizing with her own money…but thats a conversation.

CFADummy, here is a simple plan that might work for you. have your mom file a bankruptcy; her ira will not be affect.(assuming she is not touching the money, work perfect here due to the fund is dedicated for burial expenses) she then might have a higher chance to apply for medicaid. I agree with Mwvt9, consult with the attorneys.

Thank you for your help. I was told that they won’t look back at statements three months before the transfer of IRA Assets. This was told to me by the social worker. However, from what I read its five years. She also told us to go to the funeral home and open an irrevocable trust of some sort. I think its possible to pay for funeral costs beforehand and use some of the assets this way. I don’t think she can file bankruptcy. She doesn’t have any big expenses yet. I’m worried in the future these expenses will make her networth negative. It’s just frustrating to have to think about this. If medicare and her insurance doesn’t cover everything, then probably her IRA will be wiped out and she won’t even have money for funeral expenses.

Prepaid Funeral: Medicaid recipients are allowed to prepay funeral expenses by setting up an Irrevocable Funeral Trust with a funeral home. There is no limit on the amount of money that can be placed in the irrevocable trust. An irrevocable trust should be requested from the funeral director at the time pre-paid arrangements are made. (under the Medicaid section)

Sponge Bob, thank you. You must know someone with Alzhemiers. I’m sorry about that if you do. This situation has frightened me about my future. If anyone of us gets a devastating disease, probably our life savings will be wiped out :frowning:

Sorry to hear this. There is 5 years look back period for medicaid and bankruptcy doesn’t help in this case. I think she might use the money for burial costs(consult with an attorney who practices elder law), but definitely not gifts or college tuition prior to the look back period. And you should also take a closer look at the medicare and insurance she has, to see what it cover in terms of hospital cares and perscriptions…etc. Best luck to your family!