I had borrowed money from my mom and she took it out of her IRA. I paid her back in full but now she has this money sitting in her account. This was two years ago so it is too late to pay back to the IRA without penalty. However since now I am considering nursing home and the 5 year look back and since I borrowed this money and it should be in her account..I am wondering if I could just transfer the money back in without the 5 year look back penalizing her for the transfer of money. Does anyone know if that is a possibility?
I just have one thing to say about the IRA. An IRA is differed income. Meaning taxes are paid when its cashed out. When Mom withdrew money, it became income and she should have claimed that on her taxes. If IRAs are not cashed in by the age of 70 1/2 years then taxes need to be paid to the IRS. We set this up with our financial guy and a 1099 is received every year for the taxes owed since we don't want to cash them in now.
We don't have 401ks but they too are deferred money. Taxes are due, I would think, for whatever you pull out yearly. I think with the IRA and 401k I would consult with a CPA how cashing them in would effect taxes due. Will Medicaid allow for money to be set aside to pay IRS and state taxes? Pretty sure someone on the forum, like igloo, will know more than me.