Medicaid Annuities

The high cost of nursing home care scares many people. Medicaid is the only governmental program that will help. The regulations passed by federal and Ohio Medicaid make it very hard to obtain benefits in the first place and then pass the allowable assets on to children or other heirs.

There is allowable planning tool, however, that could help married couples protect assets. The tool is called a Medicaid Annuity. This is not the normal deferred annuity that most people purchase for investment purposes. These are specially designed and must meet stringent guidelines established by Medicaid.

For example, suppose that your wife must enter a nursing home. You have countable assets of $100,000. Normally, you must spend half of the money before obtaining Medicaid. Instead, you purchase a Medicaid Annuity with the $100,000 that will pay you back the funds monthly over five years, $20,000 per year, plus interest. Then, when your wife enters the nursing home, you have no assets, only income. She will get Medicaid immediately, with no spending and no waiting period. You can spend or save the $20,000 and after five years, you could have all your money back. Or, if you die too soon, the payment can continue to your children.

But, there are strict requirements. First, the annuity must be purchased and you must start receiving the monthly payments before your spouse enters a nursing home. Second, you must purchase the annuity from a company, not an individual. Third, the payments must be equal over the term of the payback, with balloon payment at the end. Fourth, the payback must be guaranteed for a term of years not longer than your life expectancy, as determined by Medicaid's tables. Finally, the annuity must be irrevocable, so you can't get your money back if you make a mistake.

Some tips: (1) Don't buy the annuity too early, before you know one spouse is ready to enter the nursing home. It must be purchased by the stay-home spouse so that the monthly payments may be kept. If the payments go to the nursing home spouse, they will be counted as income and must be paid to the nursing home, defeating the purpose. For the same reason, Medicaid Annuities don't work for single people-each payment would go right to the nursing home. (2) Don't buy the annuity too late. The day the first spouse enters the nursing home (or hospital) is too late. (3) Be sure the company you are dealing with understands the regulations to make the annuity valid. Only a handful of the annuities available will meet the requirements. Insurance agents may be too anxious to make a large commission to worry about the regulations and may cost you a great deal of money.

This regulation should help many couples obtain Medicaid benefits. If only the other rules were as helpful. Remember, Medicaid planning is very complex. In order to protect yourself and your assets, you need to consult an attorney who is well versed in Elder Law issues, including Medicaid eligibility.