She’ll Enter a Florida Nursing Home on Medicaid With $600,000 Still in Her IRA. Because the Account Pays Out Every Year, the State Won’t Count It as an Asset. The Income Is a Different Story

A Florida retiree entering long-term care with $600,000 in her IRA looks like an automatic Medicaid denial. A single applicant there can’t hold more than $2,000 in countable assets. Thankfully, Florida’s IRA Medicaid rules leave a narrow opening: once a retirement account is in payout status, the state can exclude the balance from the asset count. This means withdrawals still count, each distribution is treated as income, and that income ends up paying most of her nursing home bill.

How Payout Status Changes the Asset Count

Florida’s Department of Children and Families treats an account as in “pay status” when the owner takes required minimum distributions (RMDs, yearly withdrawals the IRS requires starting at age 73 under SECURE 2.0) or regular periodic payments. In pay status, the principal is exempt, and distributions count as income. Traditional and Roth IRAs, 401(k), 403(b) and 457(b) plans, and SEP and SIMPLE IRAs are all covered by this rule. Example: a 75-year-old taking RMDs from a $300,000 IRA keeps that balance exempt. A 68-year-old with the same account who takes no distributions has the full amount counted.

Where Florida Writes the Rule Down

The applicable regulation is Florida Administrative Code 65A-1.712, the state’s SSI-related Medicaid resource rule. It follows federal SSI resource exclusions in 20 C.F.R. § 416.1210 and adds Florida exceptions. Some materials specify that an IRA is exempt only if RMDs are taken “on a regular and periodic (monthly) basis, and no previous distributions were made.”

One caveat worth remembering is that each state treats retirement accounts differently. A family outside a state that follows Florida’s approach shouldn’t build a plan on it.

Florida’s Income Cap Still Applies to Every Distribution

On its own, Florida is an income-cap state. For 2026, an individual applying for nursing home Medicaid can have up to $2,982 a month in gross income, which is 300% of the SSI federal benefit rate. In 2025, the cap was $2,901. Income above the cap disqualifies an applicant outright.

The fix is a Qualified Income Trust, also called a Miller trust. It’s a trust that takes in the excess income each month so countable income stays under the cap. It must exist before the income comes in, can’t be backdated, and must be funded every month coverage is needed.

After approval, Florida calculates patient responsibility, the share of her monthly income that goes to the facility. A Florida elder law attorney writing in September 2026 says the state first deducts a personal needs allowance and Medicare-related premiums. A spouse living at home can receive some income. She can keep enough to reach $2,705 a month starting July 1, 2026, plus up to $812 for excess housing costs, with a ceiling of $4,067. Everything left goes to the nursing home. In practice, her IRA distributions pay for her own care.

Three Decisions a Family Has to Make Before Applying

1. Starting distributions. Putting the account in pay status locks her into a withdrawal schedule. Every dollar taken from a traditional IRA is taxed as ordinary income, so bigger withdrawals raise both her tax bill and her monthly payment to the facility.
2. Checking the beneficiary designation. Under Florida’s estate recovery law, Fla. Stat. § 409.9101, the state seeks repayment of care paid after age 55 by filing a claim against the probate estate. An IRA with a current named beneficiary passes outside probate. One Florida elder law attorney wrote that in that case the state would have no claim against the principal left in the account. If the IRA is payable to her estate, it goes through probate and the state can reach it.
3. Looking at the spouse’s account. One Florida firm’s materials say a spouse’s IRAs and pension funds are excluded. Separately, the spouse at home can keep up to $162,660 in countable assets for 2026.

What the Payout Rule Protects and What It Leaves Exposed

The rule lets her qualify while the account stays intact, avoiding a large taxable cash-out, and the balance still goes toward her care, one distribution at a time. Whatever remains when she dies reaches heirs only if beneficiary paperwork keeps it out of probate, and every step requires an elder law attorney licensed in the state where she’ll apply. The first question is whether the state uses Florida’s payout-status treatment.

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