| In order to qualify for Medicaid, a single individual cannot | | | | immediately qualify for Medicaid without having to |
| have more than $2,000 in countable assets, and a | | | | spend down the $50,000. The $354 will have to be |
| couple cannot have more than $101,540. Any excess | | | | paid to the nursing home each month, and Medicaid will |
| must be either spent down till it's gone (not generally | | | | pick up the difference. Under new laws that became |
| the best alternative), gifted (which causes a costly | | | | effective Feb. 8, 2006, the state will have to be named |
| period of Medicaid ineligibility), or converted to a | | | | as the beneficiary of the annuity up to the amount of |
| non-countable asset. Such a non-countable asset is a | | | | Medicaid benefits it paid on your behalf, during your |
| "Medicaid annuity." Here's how it works. | | | | lifetime. |
| An annuity is a regular stream of payments back to | | | | If you live to your full life expectancy and then die, the |
| you, in exchange for a lump sum of money. They can | | | | annuity payments will stop, and the state will be unable |
| be either private (made between you and a family | | | | to receive any reimbursement. But what if you happen |
| member) or commercial (made with an insurance | | | | to die after 2 years? In that case, the annuity |
| company). Medicaid only allows commercial annuities. | | | | payments will continue for the balance of the |
| For example, if you are a male, age 70, you could | | | | guarantee period, but must first go to the state until |
| transfer $50,000 to an insurance company in | | | | your Medicaid "bill" is fully paid. After that, if any |
| exchange for a monthly annuity payment of $400, | | | | payments are still to be made, they can pass to your |
| guaranteed for your life, no matter how long you lived. | | | | family members. |
| But what if you died unexpectedly after two years? | | | | So if the Medicaid "bill" is for two years' of Medicaid |
| The annuity payments would stop. Most people do not | | | | coverage, it could easily be in the amount of $96,000 |
| like that, and therefore will typically purchase the | | | | (assumes $4,000/month). Since that exceeds the |
| annuity with a "guarantee period" of at least a certain | | | | value of the annuity, the state will receive all of the |
| number of years. | | | | remaining payments and your family will get nothing. |
| According to the Medicaid rules, a male age 70 has a | | | | As you can see, using the entire amount of excess |
| life expectancy of 12.8 years. So you cannot purchase | | | | funds to purchase a Medicaid annuity for a single |
| an annuity with a guarantee period that exceeds 12.8 | | | | individual rarely makes sense. However, in order to be |
| years without causing a period of disqualification from | | | | sure, you simply must "run the numbers": how much |
| Medicaid. So let's stick with 12.8 years to be safe. | | | | money is there to invest in the annuity? What is the |
| Because you are guaranteed payments for the longer | | | | age of the nursing home resident? What is the |
| of your life expectancy or 12.8 years, the monthly | | | | expected life expectancy of the resident? Once you |
| payments will be lower. In this example, they drop from | | | | know those factors, you can try different scenarios |
| $400 to $354 per month. | | | | and see whether or not it makes sense to purchase |
| So why would anyone do this? What if you are in a | | | | the annuity. If not, then other Medicaid planning |
| nursing home and have $50,000 too much in the bank. | | | | techniques should instead be considered. |
| You could purchase one of these annuities and | | | | |