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Retirement Funds
Medicaid planning with IRAs typically involves a considerable amount of caution due to the heavy tax consequences and penalties that can result from careless errors. The same holds true for both preplanning and crisis Medicaid planning. In preplanning, the tax-qualified funds cannot simply be transferred into a trust, and in crisis Medicaid planning the funds cannot simply be co-mingled with other post-tax countable resources in spend-down strategies. So where does that leave ...
The Internal Revenue Code ("IRC") mandates that an IRA owner must begin taking required minimum distributions ("RMD") at age 70½. However, a strict reading of the pertinent sections of the IRC permit an IRA owner to delay taking RMDs until April 1st of the year following the year in which he or she turns 70½. This date is known as the required beginning date ("RBD").
From the RBD forward, a distribution must be taken by December 31st of each year. Typically, clients are advi ...
In many states, an IRA owned by the community spouse is a countable resource for Medicaid purposes. In order to protect the account from a Medicaid spend-down and qualify the institutionalized spouse for Medicaid benefits, the community spouse will be advised to purchase a Medicaid Compliant Annuity. The purpose of the Medicaid Compliant Annuity is to convert a pile of cash (the IRA) into a monthly stream of income. Once annuitized, the community spouse is no longer over-reso ...
The majority of elder law attorneys are very familiar with the Deficit Reduction Act of 2005 ("DRA"); however, I have found that much confusion still surrounds the requirements regarding designating the state Medicaid agency as a beneficiary of a Medicaid Compliant Annuity.
While Krause Financial Services rarely experiences an annuitant predeceasing the term of his or her Medicaid Compliant Annuity, in the rare occurrence of a premature death, if the designation is not correct the result ...
Recently, I worked on a case involving an individual who wanted to put his $90,000 IRA into a Self-Settled (d)(4)(A) Trust. Even though I could get the IRA transferred into a tax-deferred annuity owned by the trust, there was a question as to whether the transaction involved a taxable event. To eliminate the question, the safest course of action was to obtain a favorable private letter ruling. However, the cost of such a ruling, whether favorable or not, is approximately ...
As we all know, the Worker, Retiree, and Employment Recovery Act of 2008 ("WRERA") temporarily suspended required minimum distributions ("RMDs") in 2009. Thus, many taxpayers chose not to take a RMD in 2009. However, in 2010, the RMD is back, and taxpayers required to take a distribution for 2010 must take it by the end of the year.
Assuming that a taxpayer did not take a RMD in 2009 as a result of WRERA, does the taxpayer have to calculate the 2010 RMD in a different manner? ...
When trying to pre-plan with tax-qualified funds, whether the planning is for Medicaid or VA benefits, we all know that the primary goals are to get rid of excess assets, while minimizing tax liabilities. A balance must be created between program eligibility and tax consequences, a task with which very little text and guidance is provided in order to accomplish. In a handful of states, retirement funds owned by an ineligible spouse or even an institutionalized individual are simply ...
Contrary to a handful of states' Medicaid rules, which consider a Medicaid applicant's and/or the community spouse's Individual Retirement Account ("IRA") strictly as income if he or she is receiving the Required Minimum Distribution ("RMD"), the Veterans Administration ("VA") considers an IRA to be a countable resource and the RMD to be countable income. In order to meet the asset and income limitations of the VA, exchanging the IRA for a tax-qualified immediate annuity will conver ...
Many of the "Ask Dale" inquiries that I have received throughout the past week have been regarding the requirement of the beneficiary designations on Medicaid Compliant Annuities consisting of tax-qualified investments. At one time it was a federal rule that a state Medicaid agency was not required to be made a remainderman on annuities holding tax-qualified funds; however, this is no longer the case.
Most post-Deficit Reduction Act of 2005 ("DRA") states have dictated their own re ...
If an individual transferred his or her IRA directly into an irrevocable grantor income only trust, and waited for 60 months to pass, the individual could apply and be eligible for Medicaid benefits without any of the trust corpus being subject to a Medicaid spend-down. Of course, with the individual being entitled to receive all of the income distributions from the trust, as may be required by the minimum distributions regulations of the Internal Revenue Code ("IRC"), the individual wou ...
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