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Medicaid, Your 401(k), and Assisted Living

As you are probably aware, Medicaid provides free or low-cost care for the elderly and currently gives coverage to more than 4.6 million seniors. Unfortunately, for in-need seniors, it is not as simple as filling out some paperwork and receiving free living. To complicate matters, while nursing homes accept Medicaid, it is generally not available for use at any assisted living facilities or in-home care.

To apply for Medicaid, you will need first to decide if your assets are low enough to qualify for coverage. We recommend a trip to your financial advisor and some additional research. To help with the initial research, let’s first look at how Medicaid eligibility works:

Medicaid for Seniors

The way Medicaid considers eligibility is by reviewing and evaluating your assets and deciding what assets are Exempt and which are not Exempt, or Countable. If an asset is not considered exempt, the law views it as it is available to apply toward the cost of your living situation. While exempt and accountable assets can vary by state, below is a list of some common ones:

Exempt Assets:

  • Your Home
  • Household Goods
  • Burial Exclusion
  • Burial Space Items
  • Life Estate Interests
  • Automobiles
  • Personal Items
  • Retirement Funds
  • Non‐marketable Assets

Non-Exempt or Countable Assets:

  • Life Insurance Policies
  • Investments
  • Checking Accounts
  • Savings Accounts
  • Certificates of Deposit
  • Money Market Accounts

401(k) and Medicaid Eligibility

A 401(k) or IRA account, causes an extra layer of complication to the process. In summary, if your retirement plan is currently in ‘payout status,’ which means you are receiving at least the minimum required distribution from your plan/account on a monthly basis), then the funds are considered an annuity and are included as income. If your 401(k) plan/account is currently not in payout status and you can withdraw the entire amount, Medicaid considers it as an available fund.

Depending on your situation, it may be beneficial to take all of the cash out of the account at one time and pay the income tax penalty.

Things To Consider When Applying for Medicaid

You must use any liquid assets towards the cost of senior living before being entitled to receive any Medicaid benefits. Of course, it is not as simple as getting rid of the assets that are considered ‘available.’ Medicaid and the State of Texas look back over the previous five years to see if you sold assets below market price, transferred funds to others, or gave money or property away. If you do any of these things within five years of your application, you may receive a penalty – which can range from a small fine to a perjury charge. You must be completely transparent with your finances when applying for Medicaid.

While Medicaid benefits many seniors, it is not easy to understand or apply for, which is why we recommend talking with your personal financial advisor to discuss a customized approach that is best for your situation. While the application process can be overwhelming, it is best to obtain the assistance of a professional who will help make the process as easy as possible for you and your family.

Medicaid is only one option for paying for senior care. While Franklin Park® does not accept Medicaid at this time, we do work with potential residents to find viable payment options to make care more affordable.

Please reach out to your local Franklin Park® community to discuss your options to pay for assisted living or memory care services.