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Retirement Funds
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 ...
In most states an IRA, or a tax-qualified fund, is a countable asset for the spouse who is or is going to be institutionalized. Thus, the IRA will have to be spent down for his or her care.
In many cases the planner who is unfamiliar with Medicaid Compliant Annuity planning liquidates any existing tax-qualified accounts, subjecting the client to an early withdrawal penalty and immediate income taxation of the entire liquidated amount.
Rather than subjecting the client to this outcome, th ...
Recently, I worked on a case involving an individual who wanted to put his $90,000.00 IRA account into a self-settled d(4)(A) (“the Trust”). Even though I could get the IRA account transferred into a tax deferred annuity (“TDA”) by way of a tax-free rollover (the individual is the owner/annuitant), and the insurance company was willing to re-title the TDA into the Trust (the trust is the owner, the individual is still the annuitant, and the trust is the primary beneficiary), th ...
On December 23, 2008, President Bush signed into law the Worker, Retiree, and Employer Recovery Act of 2008 (the "Act"). The Act provides relief to plan participants and pension plan sponsors impacted by the current economic crisis by suspending the requirement to receive minimum distributions for 2009. It also provides limited relief from the defined benefit plan funding rules enacted by the Pension Protection Act of 2006 for both single-employer defined benefit pension plans and multi-em ...
Recently in Texas, I worked with an elder law attorney who had a Medicaid case involving a community spouse who had a very large IRA account. With the IRA account being unprotected - a countable resource, and subject to a Medicaid spend-down, I instructed the community spouse to purchase an IRA Medicaid Compliant Annuity ("MCA") with an annual pay-out, rather than a monthly pay-out. In Texas, an MCA with annual pay-out is an acceptable annuitization.
When the community spouse received his first ...
In a typical husband and wife situation, whereby one of the parties has entered a nursing home and needs to qualify for Medicaid benefits, what happens if the community spouse has an IRA account in excess of $104,400.00?
Unlike the states of California, Florida, Kentucky, Mississippi, New York, Pennsylvania, and Wisconsin, where a community spouse's IRA account may be a protected resource, in the other states the community spouse may not have any choice but to convert the excess IRA funds into ...
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