By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold, NJ Estate Planning Attorney

The primary risk of owning a Roth IRA is the possibility of it being spent down should the need for long-term care occur. The reason is because an IRA is included as an available resource in determining an individual’s eligibility for Medicaid benefits to pay for long-term care. Federal law is clear: an IRA is an available resource in determining eligibility for Medicaid unless it is “annuitized.” Federal law permits states to enforce the federal law as they determine, as long as it’s not “more restrictive” than the federal law. Many states exempt an IRA from being considered available as long as it is in “payout status.” Accordingly, payout status has been interpreted as the IRA owner is receiving regular payouts equal to the required minimum distribution. The greatest risk, however, is that a states less restrictive approach is merely a “policy” decision, and the state medical department can change its policy to be more restrictive than federal law allows at any time without notice. There has been a trend in that several states have done this over the past few years. New Jersey is one of these punitive states.

In New Jersey a Roth IRA is treated like a regular investment account and is considered “available” because they disregard payout status. As an available resource, it must be spent down to qualify for Medicaid benefits. This obviously is counterproductive and unacceptable to the owner of the Roth IRA. Instead of being able to accumulate assets tax free, sick seniors are forced to liquidate them to pay for their long-term care costs.

To discuss your NJ Medicaid matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at  Please ask us about our video conferencing consultations if you are unable to come to our office.