Medicaid Qualifying Annuities
If a spouse suddenly requires the 24/7 care given in a nursing home, the emotional and financial effects can be devastating. Without the proper planning, your spouse could be denied long-term care and be forced to pay out of pocket. Nursing homes are expensive and could drain your bank account within a matter of months.
Those with too much money or assets are especially vulnerable in this situation. Typically, assets must be depleted in to a certain amount to qualify for assistance and there are limits on how many assets the non-institutionalized spouse, also known as the “community” spouse, can retain. In North Carolina, the amount is $2,000 and the community spouse can retain half of the assets, but no more than $117, 240. This amount will not cover a long-term stay in the nursing home if you end up paying out of pocket as the average monthly cost of a nursing home is currently about $6,300 in North Carolina. Additionally, you will very quickly have your savings depleted to the point where very little to nothing is left. Furthermore, where the need to enter the nursing home is immediate, you do not have the option to transfer items into an irrevocable trust because Medicaid will impose a penalty which will disqualify you from receiving benefits. However, the option of purchasing a Medicaid Qualifying Annuity is available to allow the institutionalized spouse to immediately qualify for Medicaid.
What is a Medicaid Qualifying Annuity?
An annuity is a contract between yourself and an insurer. In essence, you hand over your assets to the insurer and they cut you a check for a fixed amount for a set number of years. This depletes your joint assets that can be considered when qualifying for Medicaid and instead creates an income stream for the community spouse. This allows the institutionalized spouse to qualify for Medicaid immediately.
How do I make sure the annuity I purchase qualifies?
It’s important that an annuity is not considered a transfer in the eyes of your state. You should consult an elder law attorney before you take this step as state laws can differ. Typically, a Medicaid Qualifying Annuity meets these requirements:
● Must be purchased from a private insurance company.
● Must be irrevocable – with the exception of the monthly payments, you will not be able to touch this money.
● Must be disclosed by the Medicaid applicant.
● You must receive back at least the amount you paid in for your life expectancy. For example, if you purchased a $60,000 annuity and you expect to live another 10 years, that is $500 per month. Life expectancy is determined by Social Security life expectancy tables.
● If you purchase an annuity with a time limit, it must be shorter than your life expectancy.
● The state must be made the beneficiary up to the amount that Medicaid paid on your behalf, but generally can only recover the amount of benefits paid against what is left to be paid from the annuity.
While purchasing annuities is beneficial to married couples, they do not do much good for individuals, since the annuity would have to be paid to the nursing home. If your spouse requires nursing home facilities and you are considering purchasing a Medicaid Qualifying annuity, contact us for a free consultation today.