Can The Retirement Plan(s) For a Married Couple Be Protected If One Spouse Needs Nursing Care?

In recent years, many people have accumulated a fair amount of assets in their retirement plans. This is often in the form of an IRA or a 401(k) or sometimes even a 403(b). Those funds grow on a tax-deferred basis and can be accumulated until the account holder reaches the age limit at which point he or she needs to begin making withdrawals.

So how do those funds factor into a Medicaid spend down?

Let’s start with a married couple. Most people understand that when one spouse needs nursing care, in order to qualify for Medicaid, they go through a division of assets. The State says that the house, car, prepaid funeral plans, household goods, and a small amount of cash value life insurance is exempt from the spend down requirements.

But what about those retirement plans… can the IRA or 401(k) or 403(b) be protected?

In Arkansas, the retirement plans of the Community Spouse are also NOT exempt!

Fortunately, there are steps which can be taken to protect all or a portion of the IRA or 401(k) even when it would otherwise be countable. In some cases, this can mean cashing in the retirement plan, paying the taxes, and then putting those proceeds into a Medicaid Approved Pension to provide an income stream for the benefit of the Community Spouse.

Interestingly enough, in Arkansas, the State follows the “name on the check” rule which states that even for the spouse who needs care, so long as the retirement plan is set up properly to pay the income to the “at home” spouse, then the “at home” spouse will keep all of the income, thus preserving the retirement plan, or the income stream no matter which spouse needs care.

In these cases, great care must be taken to be sure that things are set up appropriately, but the bottom line is that the retirement plan of either spouse can sometimes be protected for the community spouse no matter who actually owns the retirement plan.