Medicaid-Friendly Annuities are designed to help your clients protect their assets from a Medicaid Spend-Down, in the event of a nursing home stay. This area of planning is extremely beneficial for your clients who do not have long-term care insurance and is highly lucrative for you, the planner.
Very few annuities are considered Medicaid friendly, as an annuity must be able to be pensioned in a manner that meets Medicaid guidelines for a private pension. The pension stream must be irrevocable, non-assignable, non-commutable and for a fixed period of time that is equal to, or less, than the individuals life expectancy according to Medicaid tables.
This provides an alternative to long-term care, for people who can’t qualify for, or afford, long term care insurance. Almost everyone is a prospect for Medicaid planning and Medicaid-friendly annuities. These annuities can help people with very limited assets as well as people with an estate in excess of $500,000.
The answer is a Triple Split Annuity. Rather than putting the $78,500 into 1 deferred annuity, as in the previous example, the client could put $17,000 into 1 deferred annuity and $61,500 into another deferred annuity. At 5% the $17,000 would grow to $21,500, which when annuitized to produce the $359.47/mo, would have an exclusion ration of .7882. In other words, 78.82% of the monthly income ($283.33) would be considered return of premium and not taxable. These numbers could be adjusted to produce the desired result, the point, however, is that there is a better way than the traditional split annuity. Let our experienced representatives show you more.
Medicaid planning can be used in two situations:
Crisis situations – when an individual is already in or about to enter a nursing home. Medicaid planning can help to preserve their assets by combining strategies such as gifting with pensioning of assets. Pensioning of assets can best be accomplished through the use of special annuities that are Medicaid friendly.
For individuals who are not in a crisis situation, purchasing a Medicaid-friendly annuity will provide the option to pension assets at a later date in the future, if a nursing home stay is ever required. If a nursing home stay is never required, this annuity will act the same as any other deferred annuity.Medicaid annuities can be extremely powerful tools in planning for long-term care and in dealing with current nursing home situations. However, care must be taken in selecting and using this option. Use of the wrong type of annuity, for instance, may result in denial. Even when a qualified contract is used, the election of the wrong settlement option or the wrong term can spell disaster. Similarly, the selection of the incorrect owner or annuitant can terminate a plan. The timing of the purchase of the annuity or the pensioning of the contract is essential.