Have you been told you have too much money in savings to qualify for assistance in paying for nursing home care? Have you been told you must “spend down” your savings and investments? In some circumstances, an immediate annuity can be an ideal Medicaid planning tool for your situation. Careful planning is needed to make sure an annuity will work for you or your spouse.
An immediate annuity, in its simplest form, is a contract with an insurance company. You pay a certain amount of money to the company and the company sends you a monthly check for the rest of your life.
In most states, the purchase of an annuity is not considered to be a transfer for Medicaid eligibility purposes. It is instead the purchase of an investment. It transforms otherwise countable assets into a non-countable income stream. The income must be paid to you and not your spouse in the nursing home.
The annuity purchase must meet the following requirements:
- It must be irrevocable–you cannot have the right to take the funds out of the annuity except through the monthly payments.
- You must receive back at least what you paid into the annuity during your calculated life expectancy.
- If you purchase an annuity with a term certain (a guaranteed number of payments), it must be shorter than your calculated life expectancy.
- The state must be named the remainder beneficiary (up to the amount Medicaid pays on your spouse’s behalf.)
Example: You live in a state where the most money you can keep for yourself and still have your spouse who is in a nursing home qualify for Medicaid is $128,640 (in 2020). However, you have $228,640 in countable assets. You can take the difference of $100,000 and purchase an annuity, making your spouse immediately eligible for Medicaid. You would receive an annuity check each month for the rest of your life.
If you die with guaranteed payments remaining on the annuity, they must be payable to the state for reimbursement up to the amount Medicaid paid for your spouse’s care.
Annuities are of less benefit for a single individual in a nursing home. He or she would have to pay the monthly income from the annuity to the nursing home. However, in some states, immediate annuities may have a place for single individuals. Income from an annuity can be used to help pay for long-term care during the Medicaid penalty period that results from the transfer. In such cases, the annuity is usually short-term, just long enough to cover the penalty period.
Immediate annuities are a very powerful tool in the right circumstances. The use of these annuities as a Medicaid planning tool is under attack in some states. Be sure to consult with an experienced elder law attorney before pursuing the strategy described above.
Call the Law Office of Laurie E. Ohall today to schedule a consultation to see if an immediate annuity can help protect your life savings.