Retirement - Trust and Estate Planning Law Office

Can an IRA Affect Your Medicaid Eligibility?

For many retirees and medicaid applicants, their Individual Retirement Account (IRA) is one of their largest assets and a reliable savings account for retirement. An IRA is also something that can interfere with one’s Medicaid application if they do not understand their IRA’s status and the intricacies of the Medicaid application and what Medicaid considers as an asset. Depending on an IRA’s payout status, it will either be counted as an income source or a non-exempt asset, and each category has different meaning for a Medicaid applicant. There are several options for Medicaid applicants with IRA’s that might interfere with their ability to receive Medicaid benefits, including Medicaid Asset Protection Trusts and annuities. It is also advisable to begin Medicaid planning well in advance of retirement, in which engaging the services of an experienced Medicaid planning attorney will help tremendously.

IRA and Medicaid Eligibility

An individual retirement account (IRA) is a long-term savings account that one can use to save for retirement while enjoying certain tax advantages. It, along with a 401k, is one of the most popular savings tools used by prospective retirees. Although IRA’s are popular and practical tools to plan for retirement, one must also take into account their Medicaid ramifications. One key consideration is that Medicaid often considers the value of assets when determining eligibility. Traditional IRAs, being tax-deferred accounts, can potentially increase an individual's countable assets. This can impact qualification for Medicaid, which is especially significant for those needing long-term care services later in life. Additionally, withdrawals from traditional IRAs may be viewed as income, potentially affecting Medicaid eligibility if they surpass the allowable income thresholds. This intricate interaction between IRA contributions, account values, and potential income from withdrawals highlights the importance of aligning retirement planning with a broader understanding of financial health.

Can an IRA Affect Your Medicaid Eligibility?

Yes, an Individual Retirement Account (IRA) can affect your Medicaid eligibility. Traditional IRAs, being tax-deferred accounts, may increase an individual's countable assets, affecting qualification for Medicaid, especially for those in need of long-term care services later in life. Additionally, withdrawals from traditional IRAs could be considered as income, potentially influencing Medicaid eligibility if they surpass allowable income thresholds. Luckily, there is action that can be taken in order to protect your IRA!

Options For Protecting Your IRA

Exploring options to safeguard your IRA amidst potential Medicaid implications involves a strategic approach to retirement planning. Assessing the impact of traditional IRAs on eligibility, considering alternatives like Roth IRAs for tax efficiency, and exploring long-term care insurance to proactively address future healthcare needs. Find out how these different options ensure a comprehensive strategy in navigating the complexities of retirement planning.

Diversification Beyond Traditional IRAs: Roth IRAs

One avenue to consider is diversifying your retirement portfolio beyond traditional IRAs. Incorporating Roth IRAs, with their after-tax contributions and potential advantages in Medicaid scenarios, may provide a more tax-efficient path. Roth IRAs offer tax free qualified withdrawals, allowing for strategic financial planning during retirement. Additionally, their flexibility in distribution can provide a valuable tool for optimizing tax efficiency based on your changing financial needs in later stages of life. This option not only broadens your investment mix but also enhances flexibility in managing future tax implications.

Long-Term Care Insurance Exploration

Another option is to explore long-term care insurance, which can help cover healthcare expenses without significantly impacting Medicaid eligibility. This proactive approach can provide a financial safety net for potential future medical needs while preserving the integrity of your retirement savings. The careful selection of long-term care insurance ensures that your retirement savings remain intact while addressing potential health-related costs. By strategically incorporating this insurance, you not only shield your IRA from the potential financial burden of long-term care but also secure a comprehensive solution that aligns with your retirement planning, offering peace of mind in the face of unforeseen health challenges.

Comprehensive Estate Planning for IRA Protection

Establishing a comprehensive estate plan can also play a pivotal role in protecting your IRA. This may involve setting up trusts or other legal mechanisms to manage assets efficiently and in a way that aligns with your overall financial goals. This includes addressing potential Medicaid considerations, ensuring that your IRA remains protected within the context of your overall financial strategy.

Conclusion

Navigating the intricate relationship between IRAs and Medicaid can be complicated, therefore making it essential to approach this process with informed and proactive strategies to protect your IRA and ensure a secure retirement future. Seeking professional guidance from qualified attorneys or financial advisors can provide valuable insights tailored to your specific needs. These professionals bring a wealth of expertise, offering personalized insights and strategic recommendations, and will assist individual desires and financial goals. For all your estate planning needs, contact the The Law Office of Inna Fershteyn at (718) 333–2395.

Estate Planning Secrets for a Blissful Retirement Under the Older Americans Act

Old age is a daunting prospect for most, as leaving work and living a retired lifestyle simply is not compatible with most people’s lifetime of hard work and sacrifice. Old age, however, should not be seen simply as a transition to the end of one’s life, but rather the opportunity for fulfillment and expansion of one’s horizons. In 1965, the Congress passed the Older Americans Act to provide community social services for older people. This act, which has been renewed through the 2024 fiscal year, provides for, among other things, nutrition and social services to the aged and their caregivers, organizes opportunities for civic engagement, and community service employment for lower-income aged Americans. As life expectancy has increased, so has the commitment of the United States to provide for its elderly communities. The reality of estate planning when entering later life should also be as smooth a process as possible, and consulting with an experienced elder planning lawyer will help you to understand the potential benefits retirees and older citizens can receive and the programs they can partake in, such as those provided by the Older Americans Act.

The Older Americans Act

The Administration for Community Living, an organization dedicated to the health and independence of older Americans, is currently seeking recommendations for proposed updates to the regulations of most of its Older Americans Act programs, the most significant set of updates in nearly 30 years. The government of the United States has long sought ways to improve the lives of older Americans, and one of the most significant pieces of legislation it has passed is the Older Americans Act. First passed by Congress in 1965, the act was initially targeted at a lack of community-based social services for aging Americans. The original legislation established grant authority to states for community planning and social projects, research and development projects focused on older Americans, and training for personnel in the field of aging. The act also established the “Administration on Aging” to administer grants and serve as a nucleus for matters concerning older Americans.

Since 1965, technological and medical advances have increased the life expectancy in the United States, which means that more people are able to enjoy their retirements in later years. In response, the Older Americans Act has undergone several reauthorizations and amendments. The most recent reauthorizations, in 2016 and 2020, which will last through the 2024 fiscal year, have provided for a year-long extension for the Supporting Grandparents Raising Grandchildren Act, more autonomy for state and local governments regarding the allocation of National Family Caregiver Services to keep older people in their homes, and required the assistant secretary for aging to issues guidance to states on serving Holocaust survivors. These reauthorizations also have provisions for strengthening elder abuse prevention, screening efforts, fall-prevention, and chronic disease self-management programs.

Estate Planning for Older Age

Although old age and retired life have been made easier since the introduction of the Older Americans Act and the expansion of benefits programs, estate planning and asset protection must be a priority for your golden years. An important aspect to consider in planning for later life is Medicaid. As most older adults in the United States are at least partially insured by Medicaid, it is important to understand that eligibility is dependent on, among other things, one’s income and assets. Although estate planning might have the stigma of making one seem old or aging, it is responsible financial practice to plan ahead and ensure that you receive the health coverage you need. To this end, an experienced Medicaid planning lawyer will help you to create the best estate plan that protects your hard-earned assets while also ensuring that you receive the coverage you deserve.

It is important to understand that there are no entitlements with the Older Americans Act because Title III of the act does not create a legal requirement to finance services for individuals. Older Americans eligible for Medicaid benefits and over the age of 60 may receive services under the Older Americans Act, however, Medicaid-funded services often take precedence. Services that cannot be rendered by the Older Americans Act may still be available for Medicaid eligible persons. The intricacy of the social services provided under the Older Americans Act and other federal welfare programs such as Medicaid make having an elder planning attorney ever more important. An experienced attorney will help to determine which benefits and services one can receive and assist one in qualifying for the programs they need.

Conclusion

Old age and retirement should not be seen as an anxiety-inducing or burdensome time, but rather as an opportunity for enjoyment. The older years of Americans have been made easier with the Older Americans Act and Medicaid coverage, but this should not prevent you from engaging in financial planning as soon as possible. Creating a comprehensive estate plan and planning for Medicaid will give you flexibility in planning your finances for your later years and give you the peace of mind to enjoy your retirement and the opportunities for engagement it provides. To speak with New York’s most experienced elder planning attorney, call the Trust and Estate Planning Law Office at (718) 333-2395.

Traditional Vs Roth IRA- Which One is Easier to Inherit?

When it comes to planning and saving for your retirement, one of the first decisions you need to make is choosing which type of retirement account to open. There are numerous types of retirement accounts, each with their own unique advantages and disadvantages. Though it is beneficial to have so many options, it is important to learn about each of them to know which suits you best. However, it can get complicated, especially knowing that one day your children or grandchildren will inherit what you leave behind. This is where understanding the different tax rules in each account becomes significantly important. A good place to begin is looking at the two most popular retirement accounts: Traditional Vs Roth IRA.

What is a Traditional and Roth IRA?

A traditional and Roth IRA are both individual retirement accounts, with tax advantages. However, they differ in many ways and have their own types of advantages. This leaves it up to you to choose based on your preference. Below is a list of their main advantages and disadvantages to consider

Taxes

Traditional - The way a traditional IRA is set up is money that is invested in this account is tax-deducted. Meaning, the portion of your income that you contribute to this account, will not be taxed in your yearly income which gives you an immediate tax break. Thus, only withdrawals made from the account in the future will be taxed as income.

Roth - The way a Roth IRA is set up is money invested into the account are after-tax contributions. Meaning, money put into the account has already been taxed and can grow tax free. Thus, withdrawals made in the future will NOT be taxed. However, this will not give you immediate tax breaks on your current income.

Contributions

Traditional - With a traditional IRA you can contribute pre or post tax dollars. For 2022, the limit is $6,000, and for those 50 years and older, $7,000. In addition, there are no income limitations, anyone with earned income can contribute.

Roth - With a Roth IRA, there are some rules for contribution. Contribution limits are $6,000, and for those older than 50 years and older, $7,000. However, there are limitations based on your Modified Adjusted Gross Income, which in 2022 has changed to $129,000.

Withdrawals

Traditional - When it comes to the time of withdrawing money from your Traditional IRA, there are some restrictions. For one, all withdrawals you make after the age of 59 ½ are taxed as income. Additionally, you cannot keep your money in this account forever, by the age of 72 you are required to start making withdrawals.

Roth - When it comes to the time to withdraw money from your Roth IRA, that is when you see its advantages. For one, you will not have to pay tax on any withdrawals since contributions were already taxed before. Secondly, you can keep money in this account for as long as you want. However, if you do choose to withdraw, you can do it penalty and tax free after 5 years of opening the account and age 59 ½.

How These Differences Impacts Inheritance:

When deciding which account you want to pass on for your future family to inherit, most of the decision comes down to taxes and which would give the most benefit.

Roth - According to many financial advisors, a Roth IRA might be the most advantageous account to pass down for inheritances. This is mainly because all money in the account can be withdrawn with no additional fees or taxes. However, it is also important to consider your current tax rate versus your children's potential future tax bracket. If you believe they will have an equal or higher tax, then it would be most beneficial to set up a Roth IRA.

Traditional - Though there are some cons when inheriting a Traditional IRA such as having to pay taxes on withdrawals, there are some pros as well. For example, if at the time you are making contributions you have a high income and net-worth, you may be better off setting up a Traditional IRA since you may have a high tax rate. Therefore, when your children make withdrawals in the future they can liquidate and pay taxes at their own rate. This would essentially help you lose less money.

Reasonably, it could be difficult to predict the future as well as the tax bracket your children will be in. Therefore, it's important to remember if you choose to receive immediate tax advantages with a Traditional IRA, you can always convert it in the future to a Roth IRA. To help choose which retirement account is right for you and include it in your estate plan, contact the Law Office of Inna Fershteyn at (718) 333-2394.

Five Reasons to Protect Your Retirement Accounts

Throughout your lifetime, your retirement account offers asset protection, but as soon as you transfer it to a loved one, that protection ends. Creditors have the right to confiscate your retirement account even if your partner, child, or other close relative inherits it. Therefore, if you lose just one lawsuit, all of your hard-earned savings may be lost and your loved ones can end up without money. Thankfully, there is a fix for this issue. You can shield retirement savings from creditors by using a unique trust called a standalone retirement trust (SRT).

It is important to make sure that your intended recipients, like your loved ones, are receiving the benefits from your retirement account. Consider using an SRT to safeguard your retirement assets if any of the following apply to you or your beneficiaries:

Your combined retirement plans are sizable. An SRT can be used to protect loved ones' retirement accounts against creditors.
You worry that your beneficiary won't be very responsible with the money. If you are concerned over how your beneficiary might manage an inheritance, you should think about setting up an SRT since you can control the amount and timing of the distribution.
You worry about lawsuits, divorce, or other potential legal proceedings. A properly written SRT can safeguard the inherited retirement savings from those creditors if your beneficiary is embroiled in litigation, is about to be divorced, about to file for bankruptcy, or is otherwise involved in legal proceedings.
Your beneficiaries receive assistance. It's crucial to be aware that inheriting an individual retirement account could result in the beneficiary losing any needs-based government benefits they may be receiving or be eligible for. It is possible to draft an SRT to prevent disqualification.
You have remarried and have children from a prior marriage. Even if you named your children from a previous marriage as the contingent (backup) beneficiaries on your retirement account, identifying your partner as the primary beneficiary of the retirement account could allow your partner to purposefully (or unintentionally) disinherit your children. You can prevent this by designating your partner as the lifetime beneficiary of an SRT while designating your children from a prior marriage to receive the remaining funds after your spouse passes away.

An SRT is a unique kind of trust created for your beneficiaries to inherit your retirement assets after your passing. Your retirement account assets may be shielded from your beneficiary's creditors. In fact, an SRT can incorporate trust clauses that specifically shield your partner from harm in circumstances like:

Remarriages
Divorce
Failure of business
Bankruptcy
Lawsuits resulting from auto accidents, malpractice, or evictions

A Standalone Retirement Trust (SRT) that has been effectively drafted can offer creditor protection and help you plan for the future. If you would like assistance with protecting your retirement account, please contact the Law Office of Inna Fershteyn at (718) 333-2395.