Can a Nursing Home Take Your IRA to Pay for Care?
Understand how your IRA is evaluated for nursing home care costs and Medicaid eligibility. Plan for long-term care financing.
When nursing home care becomes necessary, a common question arises regarding Individual Retirement Accounts (IRAs). A nursing home does not directly seize an individual’s IRA. Instead, these retirement accounts are considered assets that factor into eligibility for financial assistance programs, primarily Medicaid, which helps cover nursing home care costs. This article explains how IRAs are evaluated in long-term care planning.
Understanding How Individual Retirement Accounts are Evaluated for Nursing Home Costs
While a nursing home cannot directly claim an IRA, the value held within an IRA, like other financial holdings, influences eligibility for various financial assistance programs. Medicaid, a joint federal and state program, serves as a primary source of funding for long-term care when private resources are depleted. The balance of an IRA is typically considered a countable asset by Medicaid, meaning its value is assessed to determine if an individual meets the program’s strict financial limits.
The principal balance of an IRA is generally viewed as an asset, while regular distributions from the IRA are considered income. Both the asset value and the income stream can affect an applicant’s financial eligibility for Medicaid.
Medicaid Eligibility Rules for Individual Retirement Accounts
Medicaid applies specific rules to Individual Retirement Accounts for nursing home care. For many applicants, the entire balance of a traditional or Roth IRA is counted towards Medicaid’s asset limits. These limits are generally low, with many states setting the maximum for a single applicant around $2,000 in countable assets for 2025, though some states have higher limits.
When an IRA is in “payout status,” meaning the account holder is receiving regular distributions, the principal balance may no longer be considered a countable asset in some states. Instead, the periodic payments received from the IRA are treated as income for Medicaid eligibility purposes. Required Minimum Distributions (RMDs), which individuals typically must begin taking from traditional IRAs at age 73 (or 75 for those born in 1960 or later), are always considered income for Medicaid eligibility.
Beneficiary designations on an IRA do not protect the account from being considered a countable asset during the account holder’s lifetime when applying for Medicaid. Medicaid’s asset rules ensure resources are used for care before public assistance is provided. Specific rules regarding IRAs, including whether they are counted as assets or income and the precise limits, can vary by state.
Spousal Protections Under Medicaid
Medicaid includes specific provisions designed to prevent the financial impoverishment of a spouse who remains at home (referred to as the “community spouse”) when their partner requires nursing home care and applies for Medicaid. These spousal impoverishment rules aim to ensure the community spouse retains sufficient resources and income.
One such protection is the Community Spouse Resource Allowance (CSRA), which allows the community spouse to retain a portion of the couple’s combined countable assets, including IRAs. Federal guidelines establish minimum and maximum amounts for the CSRA, which states then implement. For 2025, the federal minimum CSRA is $31,584, and the maximum is $157,920, though individual states set their specific limits within this range.
Another protection is the Minimum Monthly Maintenance Needs Allowance (MMMNA). This rule allows a portion of the institutionalized spouse’s income, which can include distributions from their IRA, to be allocated to the community spouse if the community spouse’s own income falls below a certain threshold. This transfer of income helps ensure the community spouse has adequate funds for living expenses. For 2025, the federal minimum MMMNA is approximately $2,643.75 per month in most states, with a federal maximum of $3,948 per month.
Medicaid Look-Back Period
Medicaid employs a “look-back period” to review an applicant’s financial transactions prior to their application for long-term care benefits. This period is 60 months, or five years, in most states, immediately preceding the date of the Medicaid application. The purpose of this review is to identify any asset transfers made for less than fair market value.
If an individual, or their spouse, transferred assets—including funds from an IRA or the IRA itself—during this 60-month look-back period for less than fair market value, it can result in a penalty period of Medicaid ineligibility. The length of this penalty period is determined by dividing the amount of the uncompensated transfer by the average monthly cost of nursing home care in that state. During a penalty period, Medicaid will not cover the cost of nursing home care, requiring the individual to pay privately.
The look-back rule applies broadly to all assets, not just IRAs, ensuring that individuals use their financial resources for their care before relying on public assistance. Exceptions to the penalty exist for transfers to certain individuals, such as a spouse or a blind or disabled child.