IRA May Have to be Closed for ALTCS

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Question: My mother has monthly income of about $1,400, about $1,800 in her checking account, and a small IRA with a balance of about $45,000. She needs long-term care, and I understand that Arizona Long Term Care System provides coverage to those with less than $2,000 of resources and less than $2,199 of monthly income. Will ALTCS count the IRA as part of my mom's resources?

Answer: In Arizona, IRAs are treated as available resources for purposes of ALTCS eligibility. This being the case, your mother is currently ineligible due to the $45,000 that is in her IRA.

In order to qualify for ALTCS, then, your mother would have to first “spend down” the funds in her IRA. Of course, the issue with this is that money coming out of an IRA is taxable income, but it is very often the case that the benefits associated with qualifying for ALTCS greatly outweigh the potential tax obligation.

In your mother's case, it seems all but inevitable that she will have to close her IRA in order to have funds for her care. Given that the money is likely to come out of the IRA one way or another, it makes sense to put a plan in place that will help your mother qualify for ALTCS before the money runs out.

If your mother closes the IRA and then spends the money without a plan, she will not only have a tax obligation, but will also be without the funds to pay for care while the ALTCS application processes.

As is always the case, timing is everything with these types of cases. Your mom should only close her IRA as part of a comprehensive plan to obtain long-term care coverage.

Richard White is an elder law attorney at JacksonWhite Attorneys at Law. For more information on Elder Law at JacksonWhite, please visit www.ArizonaSeniorLaw.com.