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Medicaid Qualifying Annuities

 

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Why is this important?

According to the State of Ohio, the average cost to private pay for long-term care in a facility is $6,036 per month, or roughly $72,000 per year. In reality, our firm rarely sees average monthly costs less than $10,000 per month, or $120,000 per year. While Medicaid can pay that bill, it is not achievable for everyone. When it is achievable, it is a life-saver (or life savings-saver) for many people. For those who are not candidates for or not interested in long-term care insurance, the Medicaid Compliant Annuity is a wonderful tool that a married couple should certainly be aware of. In some cases, we can help save a family 50% to 85% of their assets

What is the Medicaid Compliant Annuity?

A Medicaid Compliant Annuity is an annuity that meets the requirements set forth in the Medicaid regulations. If done properly under the rules, the amount in the annuity is no longer an asset of the couple and therefore, does not disqualify them from achieving Medicaid. (While there is no official name, for the purposes of this article we will call it the "Medicaid Compliant Annuity" or "MCA.") In essence, the MCA allows married couples to preserve substantial assets over and above the current asset limit ($113,640 for the Community Spouse and $1,500 for the nursing home spouse) by turning those assets into an income stream for the Community Spouse. Note that "Community Spouse" really means the spouse that is not applying for Medicaid. That spouse could live anywhere, including their family home or an Assisted Living Facility.

The Medicaid regulations set forth a number of requirements, including that the annuity be actuarially sound, immediately payable, made in equal installments, etc. If the requirements of the regulations are properly met, the annuitized funds are no longer "assets" but rather an income stream for the Community Spouse. Under current Medicaid rules, the Community Spouse is allowed to keep an unlimited amount of their own income. If done properly, the income stream (monthly checks) may be deposited right back into the Community Spouse's bank account (or any investment product) and accumulate above and beyond the $113,640 limit. If not done properly, this strategy can create an enormous penalty period (a period in which Medicaid will not pay for the care).

When is it a great idea?

It is normally a great idea when one spouse needs nursing home care and the couple, after spend-down, has excess assets. Spend-down steps (such as pre-paid funerals, fixing up the home, burial accounts, etc.) are often unable to protect all of the excess assets.

When may it by a bad idea?

If the Community Spouse needs nursing home care within the term, she will lose her income (the annuity checks) each month to the nursing home. It may also be a bad idea if not done by a professional who is familiar with the MCA requirements, with the oversight of an experienced Elder Law Attorney. Lastly, our office will not recommend this strategy for any amount of money, no matter how large. While any amount can be annuitized in this way under the current rules, we do not want to abuse the system and have Medicaid (or the legislature) change the rules on us. Accordingly, we try to limit this strategy to a reasonable amount of money, usually that which the community spouse may need in the future for his or her own care and expenses.

What about the house (or real estate)?

If the couple is applying for Medicaid, they are allowed to live in the house and have it not countable as an asset. Obviously, the couple often does not want to sell and annuitize the real estate. For that reason, married couples (and single persons) need to plan early to protect the real estate, which is often their biggest asset. For most people, in order to protect real estate, action needs to be taken at least 5 years before nursing home Medicaid is needed. Of course, without a crystal ball, we don't know when care, and Medicaid, will be needed. In some cases we are able to plan and save the home. See our office to discuss other strategies to protect the real estate from spend-down or a Medicaid lien.

How can we help?

If you or know of anyone that is spending their whole life savings on the nursing home bill, only to have nothing left for themselves. Please contact us to see if you qualify for a free, no obligation consultation, just call our office at (937) 898-5583 or go to our website at www.wealthcounselors.com and click on "consultations" . We will look at your situation, assets, family goals and work within the rules in putting together the right plan for you.

This information is for general informational purposes only and does not constitute legal advice or create an attorney-client relationship. For specific questions you should consult a qualified attorney.

 

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Wealth Counselors, LLC
8153 North Main Street
Dayton Ohio 45415
Telephone: 937-898-5583
Tollfree: 877-483-6730
Fax: 937-898-5584
E-mail: info@wealthcounselorsins.com

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