Annuities That Help You Qualify for Medicaid and Protect Your Assets
Long term health care costs remain high and growing. Because of this retirees with significant assets should plan for their potential Medicaid eligibility. A Medicaid qualified annuity can play a part in this planning when one spouse has to enter a nursing home leaving the other one at home.
Medicaid picks up the long term care cost of elderly who are impoverished. Long term care is very expensive and can eat up savings fast. The elder may not be able to leave a legacy to their children.
Medicaid is a federal program but handled at the local level by your State. State restrictions and regulations on Medicaid vary so you always need to be aware of your own states’ Medicaid policies.
Nevertheless, simply giving your assets away and then immediately applying for Medicaid is unacceptable under federal rules . To be safe you need to irrevocably transfer assets 60 months prior to applying. Anything shorter will prompt your state Medicaid office to attribute those assets to you and require you to pay your Medicaid monthly rate (state dependent) until all those assets have been exhausted. Only then will Medicaid foot the bill.
If you still have substantial assets, you can protect some assets for your spouse but you must strictly abide by rules for Medicaid eligibility. Here, a Medicaid annuity may be used.
A typical scenario would be if one spouse needs long term care costs to be covered by Medicaid. The couple must then divide all their assets in half and the spouse needing care must spend his or her half of the assets down to less than $2,000 in order to qualify for Medicaid benefits. But this loss of assets may reduce the standard of living for the healthy spouse at home.
So, Medicaid will allow the spouse needing care to convert his or her share of the assets into an income annuity that belongs to the healthy spouse. This legal strategy provides the healthy spouse with more income and avoids the impoverishment imposed by the Medicaid spend down requirement. These annuities must meet strict rules imposed by Medicaid and you should seek a legal expert in this area to help you.
You can also prepare for Medicaid qualification by investing in a deferred annuity anticipating its eventual conversion into guaranteed income before applying for Medicaid. These deferred annuities should be designed so that the policy can be turned into a guaranteed income stream for either spouse of a couple. That income stream should go to the healthy spouse — the one not requiring Medicaid assistance. In some cases, the annuity strategy can even benefit a single person.
Note that annuities once annuitized cannot be surrendered for value. Income from deferred annuities is taxed as ordinary income and withdrawals prior to age 59 ½ are subject to a 10% penalty. Income from annuitization is taxed part as ordinary income and part as return of capital. Any guarantees are based on the claims paying ability of the insurance company. Annuities should be considered long term investments. Use of annuities as a Medicaid planning tool is regulated by each State with their own rules and a qualified advisor should be consulted. Annuities are insurance products and are subject to insurance related fees and expenses.
http://www.medicare.org/content/view/20/67/ ‘Medicaid pays for health services for the very poor of any age. Qualifications for Medicaid vary by state, but generally the law says you must first spend down to the poverty level, using up all but about $2,000 of your assets.’
(Section 1917(c) of the Social Security Act; U.S. Code Reference 42 U.S.C. 1396p(c)), http://www.cms.hhs.gov/MedicaidEligibility/10_TransferofAssets.asp#TopOfPage
Medicaid guidelines for the use of annuities, which clarify OBRA ‘93, have been published by the Health Care Financing Agency. See your state rules for current restrictions. http://www.hcfa.gov/medicare/medicare.htm
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Tags: Medicaid annuity
March 12th, 2009 at 12:49 pm
That is one annuity i did not know about. Great post i have to read more about it sounds like better way than nurseing home insurance in some cases.
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May 25th, 2009 at 1:34 pm
Sadly, my parents did not have Mediciad qualified annuity. And when my father had to go into long-term care, it broke the bank.
My advice to all people is to plan, plan, and plan some mroe for the future.
I’ll definitely be investing in a deferred annuity soon.
Thanks!
May 25th, 2009 at 2:06 pm
While annuities once annuatized cannot be surrendered for value, they offer a way to prevent people from outliving their resources and I agree that it is a great way to protect one’s assets.
August 31st, 2009 at 2:05 am
There are so many issues with regards to annuities, and they vary from country to country, and the early withdrawal tax issues that many people do not fully comprehend and you have definitely outlined some of that useful information in this article. Thanks.
September 14th, 2009 at 10:35 pm
Long term care was a problem for us too years back since we didn’t have medicaid qualified annuity. We’ve certainly learned our lesson from that and have protected ourselves better now with.
September 21st, 2009 at 3:38 pm
One main benefit of a structured settlement or Annuity is the spendthrift protection if offers. Since the settlement money is received over a period of time, the injured party enjoys spendthrift protection from dissipation of the money due to bad judgment, bad advice, bad habits, bad company or just plain bad luck. The Defendant need not worry about managing a huge sum of money that must last a lifetime. In fact, a structured settlement can even survive bankruptcy.
September 23rd, 2009 at 6:22 pm
Just a thought, why not have the elderly disburse their income to a family member so that they no longer have an income or have assets. This way they will qualify for medicaid. medical assistant training
October 9th, 2009 at 3:44 pm
It is important to weigh all options, especially while you or your parents are still healthy. Another altenative to explore is whether your state allows long term care partnership programs. This call allow you to retain more of your assets if it is necessary to file for Medicaid.
October 13th, 2009 at 8:37 pm
Medicaid is very important and many people do not see it. When you are young and health it is not easy to understand why I should pay for a care insurance. But when you get older and your health is not so stable it can riun your live because paying health care can cost a lot. We even do not started thinking when you need help permenent. A Medicaid qualified annuity can save your live standard.
October 20th, 2009 at 4:15 pm
This is an interesting perspective on Medicaid qualified annuities, which can be an option for people in certain situations where it is necessary. Of course as with any annuity, one should make sure they are dealing with an individual or company that has the knowledge and experience to give sound advice.
October 26th, 2009 at 5:50 am
I will have to look into this type of annuity. It may prevent my parents from losing some of their assets they worked so hard for. Getting sick shouldn’t make you broke.
October 28th, 2009 at 11:28 am
I need to research this annuity some more. It could prove useful for my parents. Thanks for the information.
January 12th, 2010 at 10:13 am
Get your own annuities, because are very important for your life. Health services are very high now days, so it is better to be prepared.!! Very good article.!
January 25th, 2010 at 7:38 am
Medicaid is very important and many people do not see it. When you are young and health it is not easy to understand why I should pay for a care insurance. But when you get older and your health is not so stable it can riun your live because paying health care can cost a lot. We even do not started thinking when you need help permenent. A fashion Medicaid qualified annuity can save your live standard.
January 27th, 2010 at 8:20 am
Long term health care is not something anybody wants to go through but it happens and if possible it’s always a good idea to be prepared if the unfortunate happens. I’m sure there are insurance policies that can help with long term health care but it would expensive to pay for.
If you are not well off and have a long term health condition Medicaid would be the best solution but you would have to check in detail that you qualify in the sate you are in and hope that you are successful.
February 3rd, 2010 at 9:50 am
Well written post - more people should read it because medicalaid can be very expensive if you start to late to deal with it. This fact is difficult to bring young healthy people in their mind.
February 9th, 2010 at 9:42 am
Thank you airfare and everyone else for the helpful websites on annuities…I have been trying to understand this subject for a while now.
February 11th, 2010 at 10:01 pm
Great article. I have been looking for such an article for me to clear out some problems I had with my annuities. Thanks for the article. Appreciate it. Cheers
February 25th, 2010 at 5:47 pm
Thank you airfare and everyone else for the helpful websites on annuities…
March 3rd, 2010 at 11:25 pm
It’s very useful information. I agree with Branson that future must be planned long time ahead. You never know what your health would be like in 20 years if you are just 23 right now. Health is very expensive, so the better you prepare for your elderly life the happier you will be when you get older. From other hand I think that not many young people consider saving their money for the future to be a good idea. I understand them. They need money right here right now because they can’t know what happens to them tomorrow. Where will your annuities go if you are unexpectedly gone?
March 5th, 2010 at 1:32 am
fixed annnuities,I think it’s a good way to plan well for our old life.
March 9th, 2010 at 5:27 am
I didn’t know about this factor and let me tell you I’ve had some issues with annuities. Thanks for the information and great blog, will definately keep it in favourites
March 27th, 2010 at 3:23 am
Annuities should be considered long term investments. Use of annuities as a Medicaid planning tool is regulated by each State with their own rules and a qualified advisor should be consulted.
April 10th, 2010 at 7:11 am
Thats helpful article. I suppose, thats annuities - really important thing, thats really necessary to prepare foк it.
April 11th, 2010 at 1:09 am
If you are not well off and have a long term health condition Medicaid would be the best solution but you would have to check in detail that you qualify in the sate you are in and hope that you are successful.
April 17th, 2010 at 10:40 am
Annuities being a very important part where we can secure our lives.Every one has to get insurance for their life so that one can use this in case of difficulty.Get your own annuities, because are very important for your life.
April 20th, 2010 at 8:43 am
Never thought that annuities were the best way to go. Makes sense though, definitely gets you ready for medicaid ordeals.
April 22nd, 2010 at 5:17 pm
Excellent post! Very helpful indeed to everyone who is need of health solutions such as going for Medicaid.
May 7th, 2010 at 9:23 am
Hadn’t thought of using annuities as a planning tool before. Excellent idea and concept. I’ll need to investigate further - thanks for the tip! Can never do enough to stay one step ahead …
May 11th, 2010 at 12:40 am
Getting own annuities is everyone’s dream. Thanks for the great article to protect assets.
May 28th, 2010 at 3:22 am
I agree Annuities are the best way to keep the assets safely.It also helps to secure the life.
June 1st, 2010 at 10:39 pm
I think I do not believe that all the assets of a retiree would be in stocks. A 25% – 50% allocation to fixed income is essential for retirees, even if they are pretty good at picking dividend growth stocks.
June 2nd, 2010 at 2:12 am
I didn’t know about this factor and let me tell you I’ve had some issues with annuities. Thanks for the information and great blog, will definately keep it in favourites
June 30th, 2010 at 8:20 pm
Definitely beats nursing home insurance, you can trust me on this one. Thanks for the good write up.
July 1st, 2010 at 2:37 pm
They still often give out annuities as prizes on Wheel of Fortune, but nobody ever seems to be excited about them. I think they are great.
July 2nd, 2010 at 11:25 pm
This is very much necessary as the life is full of uncertainties and whenever you have some health related issues you need to pay huge.
With such medical annuities you are safe and the coverage part is high!
I think most people out there in US are taking such stuff as formalities or try to get rid of it thinking themselves as safer than ever without these. They thing such annuities to be a expense and finds comfortable without them as well. I think they need to reconsider their thoughts!
July 16th, 2010 at 4:21 am
There are so many issues with regards to annuities
July 21st, 2010 at 3:24 am
Excellent article I agree totally next time I do my tax return I will discuss it with my accountant. I will also discuss possible saving plan order ensure decent retirement.
July 23rd, 2010 at 9:20 am
Thanks for letting us know — I was trying to get an annuity that would still qualify me for medicaid, so this would probably save me a lot of money.
July 31st, 2010 at 8:52 pm
the annuities are beneficial to those wh want to save money for old time.