LISTEN TO LAWRENCE
My last article about Roth IRAs prompted another follow-up question that I will present and answer here.
I do not understand what you mean by “pay status” for a ROTH IRA. As an accountant, we know that you don’t have to take an RMD from a Roth so how can it be in “pay status?” I need some clarity on that, if not for my clients then for myself. Can you elaborate a little more for me?
In a prior email, I told you that your IRAs, including your ROTH IRAs, are essentially exempt from being considered an asset by Medicaid, as long as they are in “pay status.” Many questions ensued because everyone knows that you do not have to take out RMDs (required minimum distributions) from a ROTH IRA during your lifetime. Is it possible that both of these statements are true?
The bottom line is that “pay status” does not mean RMD! While there are no RMDs for a ROTH IRA, in order to exempt it from being an asset that Medicaid can go after, it still must be put in pay status. In Nassau and Suffolk counties, this means that one must withdraw an amount from their ROTH IRA each year based upon Medicaid’s life expectancy chart (which I supplied in a prior email). I understand your frustration with this, but that is the rule. Of course, because it is a ROTH IRA, there will be no income tax on this withdrawal, but it will still be considered income for Medicaid’s purposes. Yikes!
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LISTEN TO LAWRENCE