The income taxation of annuity contracts is governed by Section 72 of the Internal Revenue Code ("IRC"). In the 1980s, as a result of the tax simplification and reform measures, the code section went through extensive revisions. The legislation was intended to encourage the use of tax-deferred annuity contracts as long-term retirement savings vehicles. As such, the legislation altered the manner in which amounts withdrawn from a tax-deferred annuity are taxed, and imposed ...
In 2006, I worked with a Pennsylvania elder law attorney who had a Medicaid case involving a husband and wife, the Weatherbees. The institutionalized spouse, Mr. Weatherbee, entered a nursing home in September of 2006, and was expected to remain there indefinitely. After a resource assessment, Mrs. Weatherbee wanted to qualify her husband for Pennsylvania Medicaid benefits.
In order to eliminate the spend-down amount, pursuant to my suggestion, Mrs. Weatherbee purchased a Medicaid C ...
A spouse who continues to reside in the community after the other spouse has entered a long-term care facility is entitled to retain a portion of the couple's resources, known as the Community Spouse Resource Allowance ("CSRA").
The first step in calculating the amount of the CSRA is to perform a spousal resource assessment. This may be performed by the local Medicaid office. The elder law attorney who is advising the client on a spend-down plan needs to do this calculation as ...
In most states an IRA, or a tax-qualified fund, is a countable asset for the spouse who is or is going to be institutionalized. Thus, the IRA will have to be spent down for his or her care.
In many cases the planner who is unfamiliar with Medicaid Compliant Annuity planning liquidates any existing tax-qualified accounts, subjecting the client to an early withdrawal penalty and immediate income taxation of the entire liquidated amount.
Rather than subjecting the client to this outcome, th ...
In a case where an individual is in a nursing home and is in need of Medicaid benefits, when evaluating the countable resources a determination must be made with regard to any existing annuities that may be owned by the individual or the individual's spouse.
Tax-Deferred Annuities
With respect to a tax-deferred annuity, if the annuity contract can not be converted into a Medicaid Compliant Annuity with the present insurance company, and if the tax-deferred annuity has any gain, the best way to ...
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