Leveraging Annuities in the Medicaid Planning Process
Paying for a nursing home or assisted living facility can quickly drain a couple’s hard-earned savings within a matter of months. However, applicants for Medicaid may be denied coverage for long-term care due to having too much money or assets.
Annuities can help individuals and families when it comes to qualifying for Medicaid. If set up properly, annuities can save a large enough sum of the couple’s assets for the spouse living outside of the nursing home (the “community spouse”) to continue to live comfortably, in addition to being able to provide for any beneficiaries.
To qualify for Medicaid, the applicant may only have up to $2,000 in resources, which includes assets or property that either the applicant or his/her spouse owns. Community spouses are allowed to maintain a certain amount of resources to maintain their current lifestyle, known as the community spouse resource allowance. This is not to exceed more than half of the couple’s countable resources. Any excess funds may be “spent down” in any way, as long as nothing is given away for less than it is worth.
One way to spend down without losing any funds is for the couple to purchase an annuity to convert their assets into a monthly income for the community spouse. This amount is not counted toward Medicaid eligibility. This single-premium immediate annuity (SPIA) is paid for in a lump sum premium payment and is immediately paid back to the owner of the annuity. Medicaid guidelines approve this action as long as the annuity payments are completed prior to the end of the life expectancy of the community spouse.
For the annuity to be considered valid per Medicaid rules, it must be immediate, purchased from a commercial insurance company and be irrevocable. It cannot be transferred and must be paid out in a series of equal monthly payments. In addition, the schedule of payments must not exceed the life expectancy of the community spouse.
To determine whether the use of annuities when applying for Medicaid is right for you and your spouse, contact a skilled Florida estate planning lawyer with the Charles Law Offices.