How Can an Annuity Help an at-home Spouse?

Transcription

1 How Can an Annuity Help an at-home Spouse? PART OF A MEDICAID & VETERANS BENEFITS PLANNING HOW-TO SERIES WITH DALE M. KRAUSE, J.D., LL.M.

2 When a married couple applies for Medicaid the household net worth is considered in determining eligibility; however, the at-home spouse s income is not. Using an immediate, nonassignable, irrevocable annuity converts excess assets into an income stream. Understandably, this is a popular technique in Medicaid planning for married couples. Over the next five minutes we ll explore the ins and! outs of spousal Medicaid planning with annuities.

3 Step 1: DETERMINE THE! INVESTMENT By deducting the resource allowances and any other exempt purchases from the countable resources, you re left with the amount to be placed into the annuity. $350,000 Countable Resources - $117,240 Community Spouse Allowance - $2,000 Institutionalized Spouse Allowance $230,760 Spend-Down Amount - $14,000 Prepaid Funerals - $30,000 Home Improvements $186,760 Annuity Investment

4 Step 2: DETERMINE THE! PAYOUT PERIOD Above all else, it is highly recommended that the term not be so short that it creates an unreasonable amount of monthly income, and that it not be so long that it exceeds the Medicaid life expectancy. it may be best to go short if the community spouse is in poor health, has a small spend-down amount, has limited income, has high monthly expenses, or is uncertain as to future placement - may transfer to an assisted living facility or nursing home in the near future

5 Step 2: DETERMINE THE! PAYOUT PERIOD Above all else, it is highly recommended that the term not be so short that it creates an unreasonable amount of monthly income, and that it not be so long that it exceeds the Medicaid life expectancy. it may be best to go long if the community spouse is healthy and anticipates longevity, has a large spend-down amount, has excessive income, has minimal monthly expenses, is annuitizing an IRA - stretch the tax consequences over a period of years, desires a stream of guaranteed income for his/her lifetime, or will receive income from their spouse.

6 Step 3: DETERMINE THE! BENEFICIARIES if the community spouse owns the annuity In 95% of married couple cases, the community spouse will be the annuity owner. However, certain circumstances may dictate that the institutionalized spouse should be the owner. PRIMARY: STATE MEDICAID AGENCY! CONTINGENT: ANNUITANT S CHOICE a minor and/or disabled child can be designated before the state Medicaid agency in some states, the institutionalized spouse can be designated before the state Medicaid agency - he/she can then do a gifting plan upon receipt of funds (assuming cash commutation is available)

7 Step 3: DETERMINE THE! BENEFICIARIES if the institutionalized spouse owns the annuity In 95% of married couple cases, the PRIMARY: COMMUNITY SPOUSE! CONTINGENT: STATE MEDICAID AGENCY community spouse will be the annuity owner. However, certain circumstances may dictate that the institutionalized spouse should be the owner. a minor and/or disabled child can be designated before the state Medicaid agency a tertiary (third) beneficiary can also be designated - this would be beneficial in an instance where the community spouse predeceases the institutionalized spouse

8 BUT NOT ALL STATES! APPLY DRA to spouses SOME STATES DON T REQUIRE EQUAL PAYMENTS {This opens the door to balloon-style annuities, something previously thought eliminated by DRA. name the state Medicaid agency as a beneficiary.! Note: They still have to be irrevocable, nonassignable, and

9 WHAT ABOUT! RETIREMENT annuities PAY ATTENTION TO THE OR PLACEMENT IN THIS EXCERPT FROM DRA {Annuities are not considered assets if:! OR! Are irrevocable, nonassignable,! Purchased with proceeds from (a), (c), or (p) of 408 or IRC 1986 actuarially sound, and provide for payments in equal amounts

10 IF THERE IS UNCERTAINTY! IN YOUR STATE consider these spousal annuity decisions Rorick v. Ohio Dept. of Job and Family Services Morris v. Oklahoma Dept. of Human Services Lopes v. Department of Social Services Weatherbee v. Richman Hughes v. McCarthy Geston v. Anderson Jackson v. Selig Flamini v. Velez Koenig v. Colbert VISIT US ONLINE AT! MEDICAIDANNUITY.COM! FOR THESE & MORE

11 Every state will be different! BE AWARE OF STATE-SPECIFIC LIMITATIONS AND EXCEPTIONS This is not legal advice. Consult with a qualified attorney.

12 This is general information only. Not legal advice. YOU ARE ENCOURAGED TO SEEK ASSISTANCE FROM A QUALIFIED ELDER LAW ATTORNEY LICENSED TO PRACTICE LAW IN YOUR STATE. With respect to the material contained in this video, some of the material may be affected by current and future changes in law. For those reasons, the accuracy and completeness of such information, and the opinions of its author, are not guaranteed. In addition, because of the complexity and interrelationship of various areas of law which are presented in this video, from which there may be certain exceptions or limitations, the strategies and plans outlined in this video may not be suited for every individual, in every state. As such, it is strongly suggested that before employing any one, or more, of the techniques, strategies, expositions of any law, the reader should secure the services of a competent elder law attorney in their respective state.

13 Thank You for Watching! NEXT EPISODE: WHAT TRANSFERS WILL MEDICAID PENALIZE YOU FOR MAKING? WITH DALE M. KRAUSE, J.D., LL.M.