Incorporating IRAs in Your Elder Law Planning


Can I qualify for Medi-Cal if I have significant assets in my IRA?

Individual Retirement Accounts (IRAs) and other retirement plans like 401(k)s should form an integral part of planning for your financial future. Qualified plans, which include all plans found within Section 401(a) of the Tax Code, are eligible to receive tax benefits. Qualified plans are favored by employers because employers can deduct contributions made to employees. IRAs further provide great benefit to employees, allowing you to set aside funds for when you retire which may not impact your eligibility for state and federal benefits. Our Orange County elder law lawyers explore IRAs and Medi-Cal eligibility below.

Benefits of an IRA

Most employees will have the option to contribute a percentage of their wages to an IRA or another qualified savings plan. Some employers offer matching, which can greatly increase the amount of funds you ultimately set aside for retirement. IRAs offer benefits at all stages. During your working years, contributing to an IRA will reduce the amount you pay in taxes annually.

Upon your death, assets within the IRA will avoid probate. You will select an individual whom you want to receive the proceeds from the IRA. These assets will avoid the expense and time delay of probate. Assets left to your children can continue to grow, with your children having the ability to take distributions. As such, an IRA is an important part of most estate plans.

IRAs and Medi-Cal Eligibility

IRAs are additionally useful when it comes to elder planning. Elder law refers to planning for your retirement years, with the main focus on protecting your assets from nursing home costs. Nursing home expenses are often astronomical, potentially bankrupting even those with significant assets. In California, most elderly individuals will need to qualify for Medi-Cal to cover nursing home costs.

Medi-Cal is California’s Medicaid program, offering long term care coverage for qualifying individuals. To receive Medi-Cal, your assets for a single person cannot exceed $2,000. If you are married and your spouse will remain at home, you can have up to $123,600 in countable assets. Many assets are exempt and will not be applied towards your countable assets, including the principal value of your IRA. Money within your IRA will be exempt so long as you are taking your required minimum distribution. In this manner, you could potentially save hundreds of thousands of dollars within your IRA and still qualify for Medi-Cal. Contact an elder law attorney for more assistance with the complex process of preparing to receive Medi-Cal benefits today.

Brian Chew, the managing partner of OC Wills & Trust Attorneys, has extensive experience in the areas of estate planning, asset protection planning, business succession planning, long-term care planning, and veterans’ benefits. By devoting his practice to estate planning matters, he has founded a firm that strives to provide exceptional service to their clients by working closely with individuals and their families to create comprehensive and customized estate plans. For the past twenty five years, Brian has served thousands of clients in the matters of estate planning, wills and trusts. If you have any questions about this article, you can reach Brian Chew here.