Medicaid Compliant Annuities
Using Single Premium Immediate Annuities to qualify for Medicaid
With the increasing need for nursing care among seniors, many people are wondering how they will ever be able to cover the cost of care. Medicaid requires you to spend down assets to almost noting in order to become eligible. It is possible to reposition current assets into a Medicaid compliant annuity. This annuity would not be considered a countable asset and the individual needing care would then qualify for Medicaid to help pay for nursing home costs.
The vast majority of people in the country are unaware as to what a Medicaid compliant annuity actually is and to make things even more difficult, there are many advisors who are not familiar with these either. It can be nearly impossible for an advisor or a financial planner to give sound advice without knowing how these annuities work.
The reason few people know about these annuities is because in 2006, the Deficit Reduction Act drastically reduced the ability for these annuities to be used. In addition, even when they were being used, there were very few insurance companies that would sell them to clients.
This type of Medicaid annuity is created in a different manner and is called a Single Premium Immediate Annuity (SPIA).
Requirements of the Single Premium Immediate Annuity (i.e. Medicaid Compliant Annuity):
The aspect that makes this type of annuity different from all others is that it is required to pay out for the entire length of the individual's life expectancy. There are no other options available. In addition, Medicaid compliant annuities must:
- Be irrevocable and it must also provide payments that are made in equal amounts.
- The Medicaid complaint annuity cannot be assign to another.
- Not allow for balloon payments.
- Include the primary beneficiary as Medicaid.
- Is required to be actuarially fair. Actuarially fairness is based on the statistics computed when calculating insurance risks and premiums.
If your parent is a senior and preparing to enter into a nursing home because of failing health, you need to know how to receive some type of financial aid to offset the cost of the nursing care that will be provided. The only way in which a senior will be eligible for financial aid is to have no assets, or assets that are considered to be "not countable". A countable asset would include any type of stock or mutual fund, and even an IRA would be seen as a countable asset.
If this is a case of a married couple and the couple has assets that exceed $109,560, they will not be eligible for Medicaid financial aid. They will be required to deplete their assets until they are eligible a process called Medicaid spend down
or nursing home spend down
When determining eligibility for financial aid from Medicaid, it is important for clients to be aware of what assets will be counted and which ones will not. A Medicaid compliant annuity would not be a countable asset and thus is helpful for asset protection
. This is why repositioning current assets into an annuity that is compliant would be beneficial for any client seeking to become eligible for aid.
For many years, it has been believed that the well spouse would have to live on nothing and find a way to survive. Since there is a requirement to spend down all assets, this usually left the well spouse with few, if any financial resources. However, in 2009, a case in the Circuit Court of Appeals made a huge difference. The court confirmed that all money that was in a combined asset base between married couples could be used for an income annuity for the spouse that did not require care (i.e. the well spouse). This holds true as long as the guidelines are followed. As long as an annuity is compliant with Medicaid asset protection
, it will not matter if the annuity is greater than the limited amount of assets that are allowed which is $109,560.
This was great news to many aging couples. It means that assets could be repositioned into an annuity that was compliant and those assets would not be countable when determining financial aid eligibility for a spouse that requires nursing care even if you have not completed the Medicaid planning
you should have with an irrevocable trust
. An irrevocable trust
is still helpful at this late stage because it limits the nursing home payments to 5 years, eliminates probate, and eliminates estate taxes.
Contact Estate Street Partners at (888) 938-5872 or (508) 429-0011 if calling in the Boston, MA, area. Find out more about Medidcaid complaint annuities and how you can avoid the Medicaid spend down.
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