Medicaid Compliant Annuity Planning for a Married Couple
Assume that Mr. and Mrs. Smith are respectively 84 years of age. On January 1, 2008, Mr. Smith entered a Florida nursing home, wherein he is receiving custodial nursing home care. With the Smiths having a home, one automobile, standard household furnishings and personal property, and $250,000.00 in a savings account, Mrs. Smith is entitled to retain a community spouse resource allowance of $104,400.00, while Mr. Smith is entitled to retain an individual resource allowance of $2,000.00, leaving a net spend-down amount of $143,600.00.
After meeting with a Florida elder law attorney on January 5, 2008, Mrs. Smith realized that with the nursing home currently charging $5,500.00 per month, without a Medicaid plan, their spend-down amount of $143,600.00 will be exhausted in approximately 26 months.
On January 6, 2008, Mrs. Smith purchased a $143,600.00 Medicaid Compliant Annuity with the following guaranteed monthly payments:
Months 1 - 82: $ 1,781.68
Total Payout: $ 146,097.76
With Mrs. Smith having a 6.86 year/82.32 month Medicaid life expectancy, and with her Medicaid Compliant Annuity returning more than $143,600.00 to her within her Medicaid life expectancy, the Medicaid Compliant Annuity is deemed "actuarially sound," and is a viable Medicaid planning tool.
On the assumption that Mrs. Smith has $850.00 of monthly social security income and with the monthly payment from her Medicaid Compliant Annuity taken into consideration, her total monthly income equals $2,631.68. With her total monthly income exceeding her maximum Florida monthly maintenance needs allowance of $2,610.00, Mrs. Smith is not allowed to receive any monthly income from Mr. Smith.
On the assumption that Mr. Smith has $875.00 of monthly social security income, his Medicaid monthly co-pay to the nursing home equals $840.00. This amount was determined by reducing Mr. Smiths' monthly income by his $35.00 monthly personal needs allowance.
In a community spouse case, where the community spouse purchases a Medicaid Compliant Annuity in order to eliminate the spend-down amount, the concern following the Tax Relief and Health Care Act of 2006 is that upon the death of the community spouse any residual benefits remaining in the Medicaid Compliant Annuity will revert to the state Medicaid program. Likewise, in the aforementioned example, if Mrs. Smith does not survive the 82 month term of her Medicaid Compliant Annuity, the Florida Medicaid Program would be entitled to collect the residual benefits remaining in her Medicaid Compliant Annuity, to extent that medical assistance benefits were provided to the annuitant.
Note: In a recent statistical study related to the duration of Medicaid Compliant Annuities for past clients, Krause Financial Services found that in 92% of the cases, the community spouse survived the term of his/her Medicaid Compliant Annuity.
Special Note: As an alternative planning technique, on the belief that the community spouse will not survive the proscribed term, Krause Financial Services is in a position to offer a Medicaid Compliant Annuity with a term as short as two years - community spouse cases only.
Please click here to obtain a Medicaid Compliant Annuity Planning Questionnaire for a married couple. |
