When planning for Medicaid nursing home coverage, annuities can be a powerful tool to protect assets for couples where one spouse is either about to enter a nursing home, or is already in a nursing home and about to apply for Medicaid nursing home coverage.

While the most effective Medicaid planning is done years in advance, annuities are a planning option for short-term planning because an annuity can reduce a couple’s countable assets to the point where they can qualify for Medicaid nursing home coverage without paying a penalty. 

A basic annuity is an arrangement where an individual pays a large sum of money upfront and then receives smaller monthly payments over a period of time.

An annuity for Medicaid planning purposes converts money that would otherwise be considered a countable asset into a stream of income that does not affect Medicaid eligibility. The income from the annuity goes to the community spouse while allowing the spouse needing care to qualify for Medicaid nursing home coverage.

There are several restrictions that must be followed for the annuity to not count as an asset that affects Medicaid eligibility. First, the annuity must be immediate, irrevocable, and nontransferable. In other words, the annuity cannot be cashed in early or changed. The term of the annuity must be for a shorter term than the community spouse’s remaining life expectancy. The monthly payments should also be fixed and not variable for the annuity’s duration. In case the community spouse dies before the institutionalized spouse, then the institutional spouse becomes the primary income beneficiary and state Medicaid agency becomes the contingent beneficiary.

Individuals should always work with an experienced, local elder law attorney before doing any Medicaid planning. Medicaid rules and regulations can vary significantly from state to state. Additionally, Medicaid planning annuities vary significantly from standard investment annuities from a financial planner. A local elder law attorney can work with the client and a financial institution to make sure that an annuity is Medicaid compliant in the relevant state. An elder law attorney can also discuss other planning options to allow for Medicaid nursing home coverage.

To discuss your planning options to protect your assets and still qualify for Medicaid nursing home coverage, please call Mitchell, Brown & Associates at (314) 962-0186.