401(k) funds create a difficult issue for the elderly who are receiving long-term care and, thus, are obliged to do Title 19 planning.
Qualified money cannot be gifted (ownership cannot be changed). It is almost inevitable that qualified money is completely liquidated before the individual qualifies for Title 19. (Annuitizing the funds properly can partially get around this.)
This type of discussion usually points out that immmediate annuities give income for life (payments end at death.) Fact is, this income is forfeited by person receiving Title 19 support.
This point makes clear one of the advantage of defined contribution plans vs. defined benefit plans. Think of all the people on Title 19 who have essentially forfeited their pension to “the Title 19/nursing home system”.
401(k) money also creates issues related to means-testing for many government programs. For example, I know one individual with an IRA balance of $50,000. She has lost $40,000 of VA benefits over the last 4 years because the IRA has made her ineligible. (It is a very expensive IRA, indeed.)
The concept related to my discussion above: One of the primary benefits of 401(k) money is the value to the beneficiaries! (Because the tax-deferral continues after death.)
Most people begin to realize this when they reach their 80’s. Therefore, there is a huge economic loss for anyone who is forced to liquidate qualified money.