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Question 30 — Protecting 403(b) Assets from Medicaid Calculations

Q. A client's husband has just entered a nursing home, and the client wants to protect her 403(b) account from being counted as an asset for purposes of Medicaid, and potentially used to cover nursing home costs. Is there any way to protect her 403(b)?

A. Much depends on state law, and each state varies as to how they deal with counting retirement savings accounts as assets regarding nursing home expenses. In general, if your client annuitizes her account over her lifetime, this is some measure of protection because the only remaining asset would be the income that is generated from the principal.

That could mean that nursing home costs would need to be paid from that income; however, once the nursing home costs cease (either because the individual recovers and no longer needs nursing home care, or because he/she dies), your client would continue to receive income from her 403(b) for as long as the client lives. Be sure to have your client consult a tax attorney familiar with the Medicaid laws in your state.