Hickman Lowder

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Consider a Medicaid Compliant Annuity When Facing a Long-Term Care Event

On Behalf of | Sep 1, 2021 | Medicaid Planning

The Medicaid Act permits individuals, who are seeking Medicaid assistance, to pay for nursing home care by purchasing a Medicaid compliant annuity. These annuities can be used to protect a spouse that is still living in the community from poverty or can be used to transfer wealth to loved ones upon death.

Let’s look at how these annuities can help a married couple:

Tom, 85, was recently diagnosed with dementia and Parkinson’s disease. He requires nursing home care that will cost nearly $10,000 per month. Sherri, 78, is healthy but concerned they will lose everything to the cost of the nursing home. They own their home and have about $500,000 in assets. Tom’s income is $2500 per month and Sherri receives $1500 from social security. In a case like this, Sherri can keep their home, she can keep $130,000 cash, and use the rest of their funds to purchase a Medicaid compliant annuity that will provide additional income for the remainder of her life – and Tom will qualify for Medicaid. Using a Medicaid compliant annuity here allows Sherri to benefit from all the couple’s assets, instead of paying $10,000 per month on the nursing home.

Now, let’s look at how these annuities can help a single person preserve their assets:

Bill is 86 and needs long term-care in a nursing home. He’s got $200,000 in assets, and the nursing home is going to cost $7,000 per month after he pays over all his income. Bill can give $100,000 to his kids and use the other $100,000 to purchase a Medicaid compliant annuity. This annuity will provide enough monthly income for Bill to pay the cost of his nursing home through the penalty period imposed because of the gift he made. When the penalty period is up, the annuity term ends, and Medicaid will cover the nursing home costs.

Many people facing long-term care events believe there is no possibility of preserving assets. Yet, as seen above in these two simple examples, the Medicaid Act itself permits the purchase of a Medicaid compliant annuity to protect the well spouse or to preserve a portion of your estate for your loved ones. These situations are complicated. We know how to navigate the Medicaid process and have extensive experience. Give us a call, we are here to listen.