According to current law, retirement accounts are exempt as resouces when qualifying for Medicaid. However, income from retirement accounts are generally not exempt. That being said, there are additional income protections for applicants and community spouses of applicants. Medicaid eligibilty is complex and a full review of your parents' assets and income is required to asses Medicaid eligibility. You should contact a qualified elder law attorney.
I'm happy to be able to let you know that the 401K can be safeguarded from Medicaid claims. Although I have roots in the City, and friends practicing Elder law throughout New York - I don't practice there. Go with your mother to a qualified Elder law Attorney to review your parent's full situation. In this way your Parents can avoid falling into traps which could disqualify your Dad from receiving Medicaid long term care benefits while protecting your mother from impoverishment. This same planning can limit also the state's rights to get repaid from your Parent's assets after they are both gone. I recommend three sources to find a local elder law attorney: 1) this website, 2) ElderCounsel.Com's member directory, or 3) the New York State NAELA website.
If your Father needs care now, it is important to act quickly before the burden on your mother hurts her health.
Very truly yours,
Joel S. Weissler
Attorney at law
Weissler Law Group
3333 Camino Del Rio South #235
San Diego, California 92108
DISCLAIMER: Nothing in this post or transmitted by email should be interpreted as legal advice unless I have been retained and you have made a deposit towards my fees. This post is intended to help the person posting the question to ask the right questions with the attorney of their choice. Your time to act may be very limited and this could substantially reduce your rights and options. Do NOT rely on anything I have written hear -- You should contact a lawyer in your area immediately after reading my posting.
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I am not licensed to practice in your state. You may be able to protect the principal of the 401k from nursing home costs and still have mom qualify for Medicaid, however, it is unlikely that you will be able to protect income. Talk to a reputable elder law attorney as well as your mom's CPA to see what will yield the most favorable result.