Annuities and Medicaid
Using annuities to avoid Medicaid seizure has become a popular way to protect your assets. Generally, if your assets exceed the Medicaid test limits, you may still be eligible for Medicaid by converting the assets to an immediate annuity income stream. Under Medicaid guidelines, an immediate pay annuity payable over the annuitant's life expectancy is not a countable asset. Using an annuity in this manner may be beneficial to you in the right situation. Keep in mind that states' rules for Medicaid differ greatly and it is important to learn as much as possible about your own state's requirements. You must be careful that the combined monthly income from the annuity together with your other social security and pension payments stays under the allowable federal limits to qualify you for Medicaid.
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Immediate Annuities for Medicaid and Long-term Care Expenses
Immediate annuities provide for periodic payments that are predetermined and specified when the contract is negotiated. Payments are made at various set intervals at least once each year, and any one contract must last for a period greater than one year.
Immediate annuities are usually irrevocable contracts. Once the annuity has been purchased, the owner does not have the right to revoke the contract and obtain a refund (except for a "free-look" period of usually the first 10 days after purchase). Here are some immediate annuity payment options:
- Period Certain: guaranteed income over a period ranging from five to 30 years.
- Life Only or Single Life: guaranteed income for the life of the annuitant.
- Single Life with Period Certain: guaranteed income for the life of the annuitant and for a period ranging from five to 30 years.
- Joint and Survivor: guaranteed income covering two or more lives (usually the investor and spouse) and continuing as long as any one of the annuitants survives.
For Medicaid planning purposes, "life only" annuities are generally advisable only if you are married and have no heirs or your heirs have been given other assets.
Deferred Annuities for Medicaid and Long-term Care Expenses
A fixed deferred annuity, also referred to as a tax-deferred annuity, is a contract between you and an insurance company for a guaranteed interest bearing policy with guaranteed income options. The insurance company credits interest, and you don't pay taxes on the earnings until you make a withdrawal or begin receiving an annuity income. Like all deferred annuities, fixed deferred annuities help you accumulate money for retirement through the power of tax-deferred compound interest. Your annuity contract earns a safe, competitive return on a continually increasing balance.
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Medicaid planning in conjunction with tax-deferred annuities can be structured so the spouse living at home receives an irrevocable income stream over a set period of time. By using this strategy, one spouse may receive custodial care through Medicaid, while the "at home spouse" receives an unlimited income stream over a set amount of years dictated by a federal government guideline. You must obtain legal advice regarding Medicaid planning since guidelines on income "caps" and exemptions vary from state to state for the "at home spouse" for Medicaid planning.