Medicaid Annuities

Medicaid Annuities in Louisiana

A specialize type of annuity often referred to as a Medicaid Annuity or DRA Medicaid Compliant Annuity may be used by both single individuals and married couples when qualifying for Medicaid in Louisiana. Contact experienced elder law attorney, John Sirois, to show you how to protect assets from Medicaid spend-down using a Medicaid annuity.

How a Medicaid Annuity is used for an unmarried person in Louisiana

Tom, age 75, is single and currently resides in a nursing home. He has $200,000 in checking and savings accounts and his only income is his Social Security check of $1,800.  His countable resources are $198,000 ($200,000 – $2,000). Tom does not have long-term care insurance. The private pay rate for the nursing home is $6,000 per month. If Tom remains in the nursing home, he will exhaust his assets in 47 months ($198,000÷$4,200). Rather than completely spend down his assets, Tom gifts $107,500 to an asset protection trust for his children’s benefit. This causes a penalty period of 21.5 months ($107,500÷$5,000). Tom has $90,500 remaining in his name so he is not eligible for Medicaid LTC vendor payments, and the penalty period will not begin to run until he has less than $2,000. If he annuitizes the remaining $90,500 with a Medicaid-compliant immediate annuity, the annuity will pay Tom $4,113 per month for 22 months. His monthly Social Security and his annuity payments provide enough income to pay through the penalty period ($1,800 + $4,113 = $5913). When the penalty period ends in 21.5 months, Tom is eligible for Medicaid LTC vendor payments. With the gift and annuity strategy, Tom saves $107,500 from spend-down.

How a Medicaid Annuity is used for a married couple in Louisiana

Jim and Jane have been married for 53 years and are age 77 and 73, respectively. They have $300,000 of countable resources and do not have long-term care insurance. Jim’s monthly Social Security income is $1,500 and Jane’s is $1,000. The monthly private pay rate for the nursing home is $6,000. Jim’s 100 days of Medicare will be exhausted soon, and they are concerned about paying out-of-pocket for Jim’s care leaving few assets for Jane. If they do nothing, Jane can use the Community Spouse Resource Allowance to protect $126,420. In addition, Jane is able to keep all of Jim’s Social Security because their combined income is less than the Minimum Monthly Maintenance Needs Allowance (MMMNA is $3,160). However, Jim is not eligible for Medicaid because their countable resources total $171,580. Using a private pay rate of $6,000, their countable resources would be exhausted in 28 months ($171,580÷$6,000). At that time, Jim would be eligible for Medicaid. Rather than spending down $171,580, Jane can annuitize the countable resources using a Medicaid Compliant Immediate Annuity. Jane can annuitize the countable resources over a period not exceeding her life expectancy. Based on Louisiana’s life expectancy table (Z-1200 MEM), Jane’s life expectancy is 13.62 years. She can annuitize the countable resources over a period of 13 years paying Jane $1,099 per month. Many people prefer shorter periods and receive more monthly income. If Jane chooses to annuitize over 5 years, her monthly payments are $2,860. After the countable resources are annuitized, Jim applies and is approved for Medicaid as they now meet the income and asset criteria. While Jane is receiving monthly payments, she is unable to receive Jim’s Social Security as her income exceeds the MMMNA ($3,165.50 per month in 2019). When the annuity ends she is allowed to keep his income. Annuitizing the excess resources allows Jane to keep $300,000 for her use ($171,580 + $2,000 + $126,420).

Do not attempt to implement these strategies without the guidance of an elder-law attorney. There are numerous rules and nuances to these strategies.

Click here to download John’s Long-Term Care and Medicaid Planning Checklist.

Read John’s book, Louisiana Retirement and Estate Planning, for more information about long-term care and Louisiana Medicaid planning.