We have a customer whose wife suffered from Alzheimer’s disease. The customer had been advised to spend down his IRA so that he could access public assistance to pay for her care. Based on this advice, the customer paid for his wife’s care from his IRA and did not apply for medical assistance benefits. The wife recently died. Now the customer believes that advice was incorrect and has been advised to hire an elder law attorney to recoup the lost funds. Can the customer recover his IRA funds used to pay for his wife’s care?

This is a complicated area of law, and it would be prudent for your customer to consult with an attorney who has expertise in this field. Also, while we understand the desire to assist a customer in a difficult situation, we recommend steering clear of providing any information that could be construed as legal advice.

We do believe that the customer might have been able to retain the income and principal from his individual retirement account (IRA) without affecting his wife’s eligibility for medical assistance benefits, depending on certain circumstances and limited to a statutorily prescribed amount, as explained below. But we are not aware of any mechanism for recovering funds withdrawn from an IRA under these circumstances or for posthumously applying for medical assistance benefits after the applicant has died.

While we are not experts in public benefits law, it does appear that your customer’s IRA would have been included in the calculation of his spouse’s eligibility for medical assistance benefits, had he applied for such benefits. Generally, when determining an individual’s eligibility for medical assistance benefits, the non-exempt income and resources of both the individual and their spouse are considered. And the Illinois Department of Human Services — the agency responsible for administering medical assistance benefits in Illinois — has determined that retirement accounts that an individual can access (with or without a penalty) are non-exempt and thus must be considered when making eligibility determinations. The extent to which such a retirement account counts as part of a calculation of the individual’s resources depends on whether the individual has begun drawing benefits from the account.

However, federal law permits a spouse to retain an income and resource allowance that does not count toward eligibility determinations. In Illinois, the spousal income allowance is $2,739 per month, and the resource allowance is $109,560. Your customer should have been able to retain these statutorily protected amounts without affecting his wife’s eligibility for medical assistance benefits. In other words, depending on your customer’s total income and resources (and the other factors), he may not have been required to spend down the entire IRA before his wife could qualify for medical assistance benefits.

We did place multiple calls to the Illinois Department of Human Services after receiving your first email to confirm our interpretation of the various relevant Illinois and federal statutes and rules, but as of today, no one has returned our calls.

For resources related to our guidance, please see:

Illinois Public Aid Code, 305 ILCS 5/5-4(a) (“In determining the income and resources available to the institutionalized spouse and to the community spouse, the Department of Healthcare and Family Services shall follow the procedures established by federal law.”)

Illinois Department of Human Services, Policy Manual 07-02-17: Annuities and Pensions (“Annuities, pension plans and other retirement accounts that can be accessed are countable as income or as a resource. If the customer is drawing benefits from the plan, budget the income. The principle [sic] is exempt. If the customer is not drawing benefits, determine his or her ability to access the plan. If he or she can access the benefits without a penalty (but chooses not to), count the principle as a resource. If there is a penalty for accessing, count the principle minus the penalty as a resource. If the customer cannot access the annuity, pension plan or other retirement account, the resource is exempt.”)

Section 1924 of the Social Security Act, 42 USC 1396r-5(c)(2)(A) (“Attribution of resources at time of initial eligibility determination. In determining the resources of an institutionalized spouse at the time of application for benefits under this subchapter, regardless of any State laws relating to community property or the division of marital property—(A) except as provided in subparagraph (B), all the resources held by either the institutionalized spouse, community spouse, or both, shall be considered to be available to the institutionalized spouse, and (B) resources shall be considered to be available to an institutionalized spouse, but only to the extent that the amount of such resources exceeds the amount computed under subsection (f)(2)(A) (as of the time of application for benefits).”)

Section 1924 of the Social Security Act, 42 USC 1396r-5(c)(2)(B) (“Resources shall be considered to be available to an institutionalized spouse, but only to the extent that the amount of such resources exceeds the amount computed under subsection (f)(2)(A) (as of the time of application for benefits).”)

Section 1924 of the Social Security Act, 42 USC 1396r-5(f)(2)(A) (“[T]he ‘community spouse resource allowance’ for a community spouse is an amount (if any) by which—(A) the greatest of— (i) $12,000 (subject to adjustment under subsection (g)), or, if greater (but not to exceed the amount specified in clause (ii)(II)) an amount specified under the State plan, (ii) the lesser of (I) the spousal share computed under subsection (c)(1), or (II) $60,000 (subject to adjustment under subsection (g)), (iii) the amount established under subsection (e)(2); or (iv) the amount transferred under a court order under paragraph (3);”)

Illinois Public Aid Code, 305 ILCS 5/5-4(a) (“Subject to federal approval, the community spouse resource allowance shall be established and maintained at the higher of $109,560 or the minimum level permitted pursuant to Section 1924(f)(2) of the Social Security Act, as now or hereafter amended, or an amount set after a fair hearing, whichever is greater. The monthly maintenance allowance for the community spouse shall be established and maintained at the higher of $2,739 per month or the minimum level permitted pursuant to Section 1924(d)(3) of the Social Security Act, as now or hereafter amended, or an amount set after a fair hearing, whichever is greater. Subject to the approval of the Secretary of the United States Department of Health and Human Services, the provisions of this Section shall be extended to persons who but for the provision of home or community-based services under Section 4.02 of the Illinois Act on the Aging, would require the level of care provided in an institution, as is provided for in federal law.”)