IRA Protection

[Somie8]

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[/FONT]What is the name of your state? RI
Yes, I have a B-I-L that just got dignosed with Cancer, pretty well spread, not looking good at all. Just turned 48, can't work cuz bones are so fragile there afraid they will frature at any moment including just sitting or standing. He has no insurance and no income. Just went down and filed for SSDI they said 6 months first check even under hardship. Which I find incredible. Since he can't work. He has a IRA value is in the 20K's, is there any way of protecting this IRA? Or is it too late? Hospital 6 day visit doesn't have a hold on it yet, still in account. If we have to take it out to pay for hospital stay can we tell IRS to keep 30% to pay taxes up front? And can we legally pay for his rent 6 months in advice to keep him covered till SS starts coming in. Can we pre-pay for a funeral also, all before paying for his medical? Diagnoses is tomorrow, but honestly he might not even have that.

 

[efflandt]

If he names beneficiary(s) it could go to them, but has to remain in his name to defer tax until withdrawn (unless spouse). http://www.irs.gov/publications/p590/ch01.html#d0e3082

Otherwise, if he needs the money, there are 2 exceptions of the 10% early withdrawl penalty (farther down in pub 590) that may apply (but would still be taxed):

Unreimbursed medical expenses. Even if you are under age 59½, you do not have to pay the 10% additional tax on distributions that are not more than:
The amount you paid for unreimbursed medical expenses during the year of the distribution, minus

7.5% of your adjusted gross income (defined later) for the year of the distribution.

You can only take into account unreimbursed medical expenses that you would be able to include in figuring a deduction for medical expenses on Schedule A, Form 1040. You do not have to itemize your deductions to take advantage of this exception to the 10% additional tax.

Disabled. If you become disabled before you reach age 59½, any distributions from your traditional IRA because of your disability are not subject to the 10% additional tax.

You are considered disabled if you can furnish proof that you cannot do any substantial gainful activity because of your physical or mental condition. A physician must determine that your condition can be expected to result in death or to be of long, continued, and indefinite duration.

 

[Somie8]

Efflandt:
Can the IRA be protected and not included in the financial calculation while applying for RI Medicaid and Financial Assistance? He has no medical insurance or income at this time. I was told he would have to liquidate his IRA, spend it down, and have no more then 4K in total assets to qualify for assistance!
Thanks Somie8

 

[Dandy Don]

A consultation with a certified estate planner or financial planner can advise you the best. If you can't afford to retain one, check with your local bank and they might have a low-cost adviser on staff.