Medicaid Annuities to Protect Assets

ay you have a spouse who needs nursing home care (the “institutionalized spouse”) but you have more assets than the Medicaid law allows you, the spouse at home (the “community spouse”) keep. Currently, the community spouse may keep up to  about $130,000 in resources (not including the house, which is exempt if a spouse is living there up to about $906,000 in equity). But what if the couple has $400,000 in assets? That’s $270,000 in excess resources.

Many well meaning advisers, including lawyers, will tell you that it is too late and you have to first spend down that $270,000 before Medicaid will pay. This is incorrect advice.

Elder law attorneys have a number of good planning options here, such as “spousal refusal” and the “gift and loan” strategy, discussed in subsequent chapters. Another planning option, the Medicaid annuity, may in some cases turn out to be the best planning option.

The community spouse purchases a Medicaid annuity worth the excess $270,000, which annuity must make repayments of the full amount of the annuity plus interest within the community spouse’s actuarial life expectancy. Now, the $270,000 has disappeared and the institutionalized spouse is immediately eligible for Medicaid, saving nursing home costs of sometimes $18,000 or more per month. Spouse at home also receives an increased income which is also almost all sheltered from Medicaid.