Can my parent set up a trust to receive the distribution from an IRA?

my parent is turning 59.5 next year. she has no income and only a minimal hmo for insurance. she has virtually no savings but she has 15k from an IRA that's been sitting untouched for almost 10 years. she wants to apply for medicaid next year, but the IRA distribution may preclude it if she shows income on her tax returns. so, instead of her receiving the IRA distributions individually, can she: a) have it distributed to another individual; or b) have it distributed to a trust of some sort (i.e. some vehicle that will not affect her medicaid application)? if yes, what kind of trust? who should i talk to in order to get one set up for her. thanks.Can my parent set up a trust to receive the distribution from an IRA?
1) She cannot have more than $2,000 of ';countable assets'; in her name to qualify for medicaid, in most states. check her state, maybe $1,500, etc. All IRA's are countable, as well as savings accounts, various other items.





2) You apparantly know the rule about penalties (10%) for early withdrawal from retirement plans before age 59.5. Are you aware of the exceptions allowed in section 72(t) of the tax code? Some of those may help her. Go to www.irs.gov and search, or just google or yahoo 72(t).





3) Trusts as a help? No way. Living or revocable, family, etc: they are still her assets. Irrevocable? They are gifts and you trigger a waiting period. Too complex for this discussion.





4) I am wracking my brain over this concern about income precluding her benefits; how is that a problem? That applies to VA improved pension benefits, but here's how income applies to the medicaid formula: after her basic approval for medicaid, any monthly income she has, like social security, pension, annuity, and the like goes first to paying her medicaid expenses. She gets something like $42/month to spend at her discretion. Medicaid pays all remaining approved expenses. Past income doesn't matter, but they may ask what happened to the money. Legitimate expenses, no problem, but if you tried to hide money, pay relatives illegitimately, gift, etc, you trigger that waiting period again.





Hope this helps. You might consult an ';elder care attorney'; if more specifics are desired. I am a Chartered Financial Consultant who has done seminars including these matters for about 6 years; the field changes quite often.Can my parent set up a trust to receive the distribution from an IRA?
One more possible help. I think she may have the right to gift up to $1,000/per month to a relative or friend and not harm her benefits. You seldom hear that rule, I have not dealt with it.


Thanks for the kind words and choosing my answer; I sincerely hope this helps your mom.

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If the distributions go to a trust, it must be an Irrevocable Trust.


It is better if she transfers the IRS to someone else's name whom she can trust, who will not squander the money. Also, I believe that the transfer must have occured 3 years previously before being eligible for Medicaid.





There is also such a thing as a Medicaid Trust that a lawyer specializing in trusts can set up. You may have to look into that too.
72t-have to start making distributions by age 70.5 years of age.





She does not have to take the distributions now, nor touch the money.