By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold, NJ Medicaid Eligibility Attorney

Recently the spouse of a young woman 45 years old, suffered a massive stroke. He is recovered somewhat but is being moved to a rehabilitation center/nursing home for the foreseeable future. He has no health insurance and he needs long term care Medicaid.

Aside from an apartment he only has an IRA of approximately $150K. For someone older than 65, Medicaid treats retirement accounts as an available asset, that is well known. Here the question raised was the treatment of the IRA for someone younger than 65. Will he have to liquidate it and pay a penalty to qualify for Medicaid or can it be deemed an unavailable asset?

An IRA generally is an available asset as long as it can be liquidated regardless of whether a penalty, etc will be imposed. However, if it is a 401K or another type of qualified retirement plan, it may be considered an unavailable asset if the plan requirements place limits on how plan distributions may be made.

Here are some more facts of the case. The facility where the young man is staying is requiring (as part of admission) that he:

  • Pay a deposit of $30K
  • That a contract be signed by the person’s mother, as POA, promising the client will be responsible for payment of $2,200 a day (plus doctor’s fees) for at least 60 days.

Now the issue here is whether this type of contract is standard and/or enforceable. Is there any way to apply for Medicaid immediately? If he has no insurance and no income, the individual should be able to qualify for the Affordable Care Act expansion Medicaid. This will pay for long term care as long as he’s certified by his managed care organization. If he doesn’t recover he can and should apply for Social Security Disability with Medicaid health insurance. Immediately (as in immediately) the IRA can be placed in a self-settled SNT. Unfortunately the IRA, when liquidated and placed into the SNT, will generate taxable income to the person but this will be offset by a medical expense deduction unless, and this is the key, he rolls his IRA into a Medicaid qualifying annuity which will reduce the immediate income tax consequence.

To discuss your NJ Medicaid Eligibility matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com.  Please ask us about our video conferencing consultations if you are unable to come to our office.