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A Medicaid professional consultant helping an elderly woman to protect her assets and money from the nursing home spend down.

Medicaid Annuity: Buying Actuarially Sound Annuities

Medicaid rules & and purchase of annuities

The aspect of Medicaid rules governing the purchase of annuities can also be complex. George's wife Ella has been placed in a nursing home. When Ella entered the nursing home, the countable assets between the married couple totaled more than $400,000. Under the spousal impoverishment rules, George will be allowed to keep $76,000 as a form of protected resources. This is the money he will have to use to live on. Two years after Ella entered the nursing home, George purchased two annuities. These annuities would pay him $7,000 each month for a period of five years. This purchase reduced the amount of Ella's assets that were available to pay the nursing home, so George applied for Medicaid for her. The courts claimed that Ella transferred the amount in assets for less than the fair market value, so she would have to wait the ineligibility period.
When George appealed the findings, the courts upheld the original denial of Medicaid. Even though the annuities were actuarially sound, the court rules that the purchase of the annuities was in violation of the federal spouse impoverishment laws. Based on those laws, George would have been allowed a maximum monthly income of $2,000. Obviously, the amount from the annuities is much more than that amount.
In most cases, the court will allow a caseworker to determine whether the transfer of assets will disqualify an individual from Medicaid benefits. In George's case, the caseworker agreed that the purchase of the annuities was not legitimate use of the funds, so the benefits for Ella will be declined.
Though George thought he was doing the right thing for him and his wife, it turned out that it was a financially destructive decision. Any married couple in which one spouse has, or will be entering a nursing home, should consult with an attorney prior to making such decisions. These decisions can have a severe effect on Medicaid eligibility. The rules and laws regarding Medicaid are very complex, often too difficult for most people to understand. It is suggested to avoid taking matters into your own hands. Always talk to an attorney first.
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