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Blog Articles: What’s a Medicaid Annuity?

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It’s not uncommon for older couples to reach a point when nursing home care is needed for one spouse — and the cost isn’t something they were prepared for.

For someone who may be in need of long-term care in a nursing home, it is important to know that Medicare pays for skilled rehab, not long-term care. While Medicaid is available when a senior’s financial resources are minimal, some couples face the possibility of depleting their own assets to pay for nursing home care and leaving the healthy spouse in a precarious financial situation. Beck & Lenox Estate Planning & Elder Law, LLC, uses Medicaid annuities, when appropriate, to help someone needing nursing home care to qualify for Medicaid assistance. So, what’s a Medicaid annuity?

We found an article that may interest you. CNBC’s recent article entitled “A ‘Medicaid annuity’ may be a useful option when your spouse needs nursing home care” says that some seniors are in a difficult position because they have extra cash that will keep them from qualifying for Medicaid initially. While some couples “spend down” their assets — paying off debt or making purchases that will not inhibit their Medicaid eligibility to qualify, another option may be to purchase a Medicaid annuity. This lets you convert countable assets (for Medicaid eligibility purposes) into an income stream for the healthy spouse — and not have it factored into the calculation.

Note that when you apply to have Medicaid cover the cost of institutional care, Medicaid takes a snapshot of your assets to determine eligibility. Assets are generally viewed jointly, even if they are in your spouse’s name. The specific limits on those assets (including cash, investments, bank accounts, etc.) depend on the specific state. In Missouri, an individual can have up to $5,035 in assets; a couple both in a nursing home can have up to $10,070. In the case of a married couple where only one is going into a nursing home, many states allow the healthy (“community”) spouse to keep up to $137,400 in assets (i.e., cash, investments, bank accounts) that do not count toward the eligibility calculation. Assets above that threshold are considered available to pay for the other spouse’s care.

In addition, Medicaid has a five-year “look-back” period in most states. That means they can review the previous five years to be sure any assets were not transferred to family members, just so the person could qualify for Medicaid.

An individual’s income also is a concern, since most states have a limit. However, the healthy spouse’s income generally is not counted. That is where a Medicaid annuity comes into play. If a couple has $100,000 above their state’s asset cap, they would buy an annuity with it that is payable to the healthy spouse, based on their own life expectancy.

The annuity must meet certain requirements, such as the state generally must be named as the remainder beneficiary for at least the amount that Medicaid paid for the ill spouse’s nursing home care. It also must be an immediate annuity (it begins paying the income stream right away instead of being deferred) and be irrevocable.

If you need to better understand what’s a Medicaid annuity and whether or not it is right for you or your loved one, ask an attorney who specializes in elder law about it. Beck & Lenox cautions you about making sure the elder law attorney uses a financial advisor who is very experienced with Medicaid annuities.  If the wrong annuity product is used, it could jeopardize Medicaid eligibility.

Reference: CNBC (Jan. 26, 2022) “A ‘Medicaid annuity’ may be a useful option when your spouse needs nursing home care”

 

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