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QUESTION:
SPIA, Medicaid and LTC

I am wondering if anyone is familiar with the rules around single premium immediate annuities and Medicaid. I have a couple, one of which has Parkinson's disease and no long term care insurance. They have a modest investment account of around $250,000. So they are not in a position to either qualify for Medicaid or pay for long term care out of pocket. The amount they need each year out of this account is quite modest, so that a conservative investment strategy is appropriate. It occurred to me that by purchasing a SPIA for this income stream, they may be closer to qualifying for Medicaid for the ltc he will need.

My recollection is that if the annuity has a survivorship feature, that needs to be taken into account as an available asset when applying for Medicaid, but that this is not the case with a life only SPIA. In the back of my mind I know the rules are quite a bit more specific than that and am hoping someone has a good handle on this information.

Thanks.

Paul Wolf, MS, CFP®, CLU, ChFC
Certified Financial Planner Practitioner
Licensed Investment Advisor
75 York St.
POB 799
Kennebunk, ME 04043


REPLIES:

The rules regarding annuities and Medicaid differ HUGELY from state to state. In some states, an immediate annuity can be a useful "Medicaid spend-down" instrument; in others, less so. I'm told that, in some states, there ARE no "Medicaid annuities".

The duration of the annuity CANNOT exceed the SOCIAL SECURITY life expectancy of the annuitant, which is generally LESS than the life expectancy of an annuity employing current a current annuity table. It must be IRREVOCABLE and NON-ASSIGNABLE. It may be only on ONE life (the institutionalized spouse or, for couples, the "community spouse").

You GOTTA check the rules for the state of residence of your client.

A good source for into is http://www.medicaid-annuity.com/.

Speaking strictly for mysef, I KNOW that I don't know enough about these rules, which is why I will call in a specialist who does.

John L. Olsen, CLU, ChFC
Olsen Financial Group
131 Hollywood Lane
Kirkwood, MO 63122


Thanks, John. I will check out that link.

And yeah, that is pretty much the same way I feel about the rules (and hence my inquiry). I do not do this stuff enough to be an expert in it. I will probably have an attorney direct this one.

Paul


Well John, for someone who doesn't know enough about Medicaid rules - you sure covered the highlights very well! I work with this all the time - but I won't comment on cases outside Massachusetts. You can get state-specifc information on my favorite Medicaid site: http://www.elderlawanswers.com/AskHarry/Forum.asp Just Select your state in the "View State Specific Content" field on the lower left column.

-Ron

Ronald D. Birnbaum,CLU,ChFC,CSA
220 Boylston Street Suite 306
Chestnut Hill, MA. 02467


Paul - what kind of long term care does the ill spouse need? A SPIA will do nothing for your client if the long term care is done at home. It's only for people who are in a nursing home (at least in Massachusetts - other states vary!). Many people with Parkinson's only have home care, so the annuity won't work. If the spouse is ill enough to need to enter the nursing home, in my state the couple could keep $94,760 in liquid assets and put the rest in a Medicaid Qualified Annuity - then annuitize so the check goes to the at-home spouse. The at-home spouse can thus keep their entire $250,000 while Medicaid pays for the nursing home. Medicaid annuities are allowed in Maine - so this strategy should work for you as well. But check with a Elder Law Attorney in your area. Elder Law Attorneys across the country can be found at this website:

http://www.elderlawanswers.com/find_an_attorney.asp

-Ron

Ronald D. Birnbaum,CLU,ChFC,CSA
220 Boylston Street Suite 306
Chestnut Hill, MA. 02467


Thanks, Ron. I expect at some point he is going to need nursing home care. I will check out that site.

Paul


Well, Ron, turns out one of the attorneys on the list for Maine is a long time client/friend of mine. So there you go! Thanks for your help.

Paul