Qualified plans such as IRAs, 401(k)s, 403(b)s and other deferred compensation are excellent ways to help reach your estate planning goals and ensure your wealth is not depleted by excessive taxes and assisted living costs. IRAs in particular help achieve both of these goals because they are not taxed and if utilized properly, will not count against you when applying for Medicaid to pay for nursing home care.
For estate planning purposes, qualified plans are considered those which individuals make contributions to while working and begin making at least the required minimum distribution (RMD) at 70-years old. IRAs and qualified plans help encourage people to save early and often for their retirements by offering these tax-free incentives and should be taken full advantage of to ensure we can live our our retirement in comfort.
If an individual is already living in a nursing home and applying for Medicaid, the principal amount of the IRA is protected when calculating one’s assets to determine whether or not he or she qualifies for Medicaid as long as that person is taking the RMD. For a Roth IRA, it is not necessary to take the RMD if distributions are being taken.