Tag: Medicaid eligibility

Elder Law

Married Couple’s Medicaid- Compliant Annuity

SchulzeLawGroup

In general, an annuity pays a fixed amount annually to the owner for the remainder of his or her life. Most annuities are deferred, meaning the payout doesn’t occur until a later date. However, you can receive immediate payouts if you purchase a Medicaid-Compliant Annuity (MCA). When you buy a Medicaid annuity, you give a company a lump sum of cash in exchange for a guaranteed income stream. While only private insurance companies can issue annuities, you may purchase them through banks, financial planners, insurance agents, and brokerage firms.

The Benefits of a Medicaid Annuity

In what circumstances is a Medicaid annuity beneficial? Many Medicaid applicants are denied coverage for long-term care because they have too much money or too many assets. However, Medicaid applicants applying with insufficient funds to pay their nursing home bills can leave a healthy spouse destitute in the short term if paying out of pocket. A Medicaid-compliant annuity can accelerate eligibility for the joint state and federal Medicaid health insurance program, which pays for a person’s medical bills and nursing home care while providing reliable income for the healthy at-home spouse.

To properly plan for a Medicaid-compliant annuity, seek the advice of an elder law attorney who understands your state’s Medicaid rules. There are ordinary immediate payout annuities that are not Medicaid-compliant, so it is critical to receive the correct advice before your purchase. The goal for married couples is for the healthy spouse (the annuity owner) to collect the annuity income while the spouse needing medical benefits from Medicaid-funded extended care and nursing home benefits remains eligible.

Medicaid-Compliant Annuity Requirements

  • The MCA is for an individual and must be non-assignable and irrevocable
  • The annuity income payout must be based on the life expectancy table equivalent to the Social Security life expectancy tables Medicaid uses
  • The annuity terms can’t extend beyond the annuity owner’s life expectancy
  • All premiums will return to the client by the end of their life expectancy
  • The immediate irrevocable annuity must not have a cash value
  • The restricted annuity may not have balloon payments, and the distribution of annuity payments to the owner must be equal and actuarially sound
  • The Medicaid beneficiary structure must comply with the state’s Medicaid recovery rules
  • Guidelines and recovery rules vary by state law, often asking the State Medicaid Agency to be named as beneficiary

Drawbacks for Medicaid-Compliant Annuities

These Medicaid-compliant annuities are challenging to set up, may not cover all of your assets, and preclude you from accessing them if you require them for future needs. However, because of long-term care’s prohibitive costs, many married couples are willing to accept these potential risks because Medicare does not cover long-term care. The national average for long-term care insurance for a couple both 60 years old is $3,400, and approximately 30 percent of applicants between 60 and 69 are declined coverage.

While that may seem like a lot of money to pay in premiums, if you qualify for the insurance, it pales in comparison to the national estimates of long-term care costs out of pocket. According to Genworth, the cost of long-term care in a 2021 survey cites the following monthly average costs:

annuity.org

Non-Countable Income Stream

Purchasing a Medicaid annuity converts an asset into a monthly income stream for the healthy spouse, and this income does not count toward Medicaid eligibility. Purchasing this annuity type means the couple’s assets do not have to be “spent down” for one to be Medicaid eligible. However, the annuity payments must be completed before the end of the healthy spouse’s life expectancy so that the annuity purchase does not become giftable to heirs.

A Medicaid-compliant annuity will convert liquid assets into a lifelong income stream that helps a healthy spouse maintain their quality of life while the spouse in need of long-term care can still qualify for Medicaid. The Medicaid-friendly annuity requires that it be irrevocable (unchangeable) and non-transferrable to heirs upon your death. Since this purchase must be irrevocable to achieve the goals, it is crucial to meet with an elder law attorney to ensure your selection is the right financial product for your circumstances. A Medicaid-compliant annuity can help both spouses in a marriage to get the resources they need should one require long-term care.

We hope you found this article helpful. If you have questions or would like to discuss your personal situation, please don’t hesitate to contact our Reno office by calling us at (775) 853-5700.

Elder Law, Elder Living, Estate Planning, Healthcare

How Do the Stimulus Payments Affect Medicaid?

SchulzeLawGroup

The federal government has issued direct payments, “stimulus checks”, to most Americans to invigorate the economy after the devastating coronavirus pandemic. This money is to ease the pain of the Covid pandemic and to jump-start the economy.

The stimulus money should have arrived in the same way that Social Security payments or tax refunds are made, either direct-deposited into a bank account or mailed as a paper check. If the money has not arrived, or for guidance in general, consult the IRS website:

https://www.irs.gov/coronavirus/economic-impact-payment-information-center#more. Other options are to call 800-919-9835 or 800-829-1040, or you can visit your local Taxpayer Assistance Center.

Those who are receiving means-tied government assistance, like SSI, VA benefits, or Medicaid to pay for long-term care, need not worry that stimulus money will be counted against them for eligibility. As long as recipients spend the money within twelve months, the money will not push them over the maximum amount they are permitted before they are penalized.

Recipients may use the money to buy new clothing, cell phones or televisions, toiletries, snacks, dental treatment, or improved quality of medical supplies. They may buy an irrevocable funeral trust, to avoid future expenses to family members. They may give the money away to family or charities. The money might pay for updating estate-planning documents, or for consulting a geriatric care manager. (Some commentators believe that you could give the money away to family or charities. While this may be OK under federal law, it’s probably best not to take chances with how the states may interpret it. Spend the money, don’t donate it.)

Provided that the money is not spent on what could be called an asset or an investment – like, for example, rare coins or stocks or bonds – the money will not be counted against the asset limit for Medicaid eligibility. And, again, the money must be spent within twelve months. It must not be forgotten about or left unnoticed in a bank account.

It also must not be misappropriated by nursing homes or assisted-living facilities. If this has happened to you or your loved one, inform the facility manager that the money must be refunded to the resident. Cite the law that carves out the payment from being counted toward federally assisted programs like Medicaid: 26 U.S.C. § 6409.  Or, show them a handout downloadable from the Congressional Research Service.

If the facility will not refund the money, contact your state’s attorney general. Then lodge a complaint with the Federal Trade Commission.

Recipients of assistance, like anyone else, are free to spend their stimulus money. The money is theirs. It is tax-free. It is intended to be spent, and it should be spent, in any way the recipient would like (subject to the conditions above).

This is one time when spending is unquestionably a good thing – for buyers and sellers.

If you have questions or would like to discuss your situation in a confidential setting, please don’t hesitate to reach out. Please contact our Reno office by calling us at (775) 853-5700.