Q: My question is about a bank account that my father has set aside for me that requires proof of death. He is bedridden and not able to leave a care facility, so Medicaid is going to start receiving his Social Security checks.
Will they consider this account an asset of his, and try to take it to pay medical expenses? --DW via email
A: What do you mean, will they consider this account his asset? It is his asset!
You may be in the habit of thinking of it as yours, but in fact this account belongs to your father. It won't be yours until he dies. That's why the bank requires proof of his death before letting you touch this money.
It sounds as if your father is receiving Medicaid assistance to pay his medical and/or long-term care nursing home bills. Medicaid's rules vary considerably depending on the state. But generally speaking, your father would have to spend most of his own income and assets on his care before he became eligible for Medicaid assistance. (And the payments your father made towards his care would go to the care facility, not to Medicaid.)
There are two 'exempt' assets for Medicaid purposes -- i.e., assets that your father wouldn't have to use to pay for his care before qualifying for Medicaid assistance. They are his primary residence and his Individual Retirement Account. His annual IRA distributions would have to be paid towards his care; but the IRA principal would be protected. (Of course, depending on the length of his nursing home stay, eventually the IRA principal would all be paid out in annual distributions.)
But the account you describe sounds like a straightforward 'pay-on-death' (also known as an 'in-trust-for') bank account, not an IRA. In that case, as far as Medicaid eligibility is concerned during your father's lifetime the money in this account is available to pay for his needs.
Please send your questions to Lynn@LynnBrennersFamilyFinance.com. I'm sorry I can't respond personally to every email. Questions are only addressed online.
(c:) Lynn Brenner, All Rights Reserve