| Retirement plans and Irrevocable Medicaid Trusts…read on:
CLIENT QUESTION:
I have an Irrevocable Medicaid Trust with your firm. I have a Thrift Savings Plan with the Post Office. I need to start taking out my RMD (required minimum distribution). My question is does this affect my 5-year look back for Medicaid and, if so, is it just the RMD portion or the whole total amount? Also if the RMD is subject to the 5-year look back would every year start a new 5-year look back? Thank You.
MY RESPONSE:
O.K. I can see here that you are very confused or maybe I am with this question. Understand this…your Thrift Savings Plan (or your 401k, 403b, IRA, ROTH, or any other retirement plan), is not in the trust and never will be. If you were to transfer your retirement accounts to a trust, it would destroy the income tax deferral of the plan. The good news is that you do not need to transfer your retirement accounts to a trust because all retirement accounts are exempt from Medicaid’s asset test. They just don’t count, they are exempt as long as you are taking out the right amount each year. However, the RMD you take out every year is your income and Medicaid can go after that. Note that the amount that Medicaid wants you to take out each year is based upon their tables and not the IRS’s, which are more generous to Medicaid.
In any event, since the retirement account is not in your trust (remains in your name), then taking money out of it each year does not affect anything, including your 5-year look back because you are not giving anything away. However, if you were to then make a gift of your withdrawn amount, then each year this will cause a new 5-year look back to run on the annual transfer, and not the total amount remaining in the account.
I hope this helps. |
