Medicaid Compliant Annuities
By Roccy M. DeFrancesco, JD,CWPP, CAPP, MMB - 
Email Editor
Date : November 3, 2009
As I stated in last week's newsletter, Medicaid annuities are BACK! (Click here to read it). It's good for society that the non-nursing home bound spouse no longer has to impoverish him/herself now that Medicaid annuities are back.
Do you know what a Medicaid compliant annuity is?
If you are like 99% of the general public, you don't know what a Medicaid annuity is or how you would use one to help yourself or a loved one. What's worse is that 99% of the advisors in this country don't know how to use a Medicaid compliant annuity to help their clients. |
Why don't most advisors know about Medicaid annuities?
As I stated last week, when the Deficit Reduction Act (DRA) was finally enacted in 2006, it severely curtailed the ability to use Medicaid annuities. Additionally, even when these annuities were more useful, only a handful of insurance companies offered them. Finally, there is no educational body today that educates on them. I used to cover Medicaid annuities in my CWPP course but pulled the module after the DRA went into effect.
What is a Medicaid compliant annuity?
It's a uniquely designed Single Premium Immediate Annuity (SPIA) (or a deferred annuity that can be converted to a compliant SPIA). The unique aspect of a Medicaid compliant annuity is that it must pay out over the annuitant's life expectancy (only option). The annuity must also have the following characteristics:
-It must be irrevocable and non-assignable; -It is actuarially sound; -It must provide for payments in equal amounts, with no deferral and no balloon payments; and -It must name the state Medicaid Program as the primary beneficiary to the extent that medical assistance benefits were provided to the institutionalized individual (certain exceptions may apply).
Why use Medicaid annuities?
When a senior client is getting ready to enter a nursing home, the question then becomes, "How can he/she receive financial aid?" The way to receive financial aid is to have no assets or the "right" assets. The wrong assets are stocks, mutual funds, CDs, money market accounts, and, yes, IRA or qualified plan money.
Married couples who have more than $109,560 of the above-listed "countable" assets are not going to receive aid until they "spend down" their assets to meet these minimums.
Guess what is NOT a countable asset? Properly used/structured Medicaid annuities. Therefore, for many clients, Medicaid planning will consist of repositioning countable assets into properly structured Medicaid annuities so they can then become eligible for Medicaid benefits.
July 2009 court case (why Medicaid annuities are BACK)
Until recently, it was thought by many that the spouse staying in the marital residence had to impoverish him/herself in order for the nursing homebound spouse to receive aid.
In July 2009, a state Circuit Court of Appeals case sided with the Department of Jobs and Family Services (agency that handles Medicaid services). The Court of Appeals confirmed what the Federal Law said which was that monies in the family's combined asset base can be used for an income annuity for the "well spouse" (non-nursing homebound spouse) as long as it follows the statutory guidelines (stated above). Even if these monies are greater than the asset allocation for the well spouse, if you follow the Medicaid Compliant rules, the annuity is OK.
What does this mean? It means that couples will be able to reposition tens if not hundreds of thousands of dollars into Medicaid annuities and NOT have the income from the annuities count against the aid a nursing homebound spouse can receive.
If you or a loved one are candidates for Medicaid aid for nursing home care, knowing the beneficial laws as they pertain to Medicaid compliant annuities can be life changing. Gone are the days of having to spend down every penny so a spouse can receive financial aid for nursing home care.
If you want to know more about the 401(h) plan, please e-mail info@trustmakers.com.
Circular 230 disclaimer: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.
| If you would like to discuss the use of trust for you, your family, or even as a marketing tool for your business, give us a call we would love to talk with you about it. Please contact us at info@trustmakers.com |
By Roccy M. DeFrancesco, JD,CWPP, CAPP, MMB
TrustMakers.com
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ABOUT THIS EDITOR:
Roccy DeFrancesco, JD, CWPP, CAPP, MMB - Author and lecturer, Roccy specializes in advanced estate and asset protection planning. Roccy's passion is to teach advisors how to implement lawful strategies that will hold up for the test of time.
11 NOV
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