How Do I Know When a Client Is a Good Fit for an MCA?
If you’re new to crisis Medicaid planning or simply new to using a Medicaid Compliant Annuity (MCA), it can be tough to recognize when a client is the right fit for an MCA. In some cases, the client is not yet in a facility. In others, they are utilizing LTCI benefits to pay for care. The following outlines the top three items to look for when considering an MCA for your client.
1. The client must be in a facility or ready to enter one.
It’s important to keep in mind that MCAs are crisis planning tools, not preplanning tools. An MCA can only be purchased when the client is immediately ready to apply for Medicaid, meaning they must be in a Medicaid-approved facility and needing care. It cannot be purchased as a preplanning tool since the strategies involved rely on the person being ready to submit a Medicaid application immediately after the annuity is purchased.
In some cases, attorneys may reach out to us to begin the process of obtaining quotes and discussing possible strategies when the client is about to enter a facility, which we are happy to help with. However, keep in mind some strategies require us to know the client’s exact cost of care, so in those cases, we are unable to give an accurate picture of what an MCA plan might look like.
2. The client must be in the facility indefinitely.
Once an MCA is purchased, the transaction cannot be undone. Additionally, the contract is irrevocable and non-assignable, meaning the parties to the contract cannot be changed and the policy cannot be sold on the secondary market. Therefore, it’s important to ensure the client is not in a temporary care situation. For example, an MCA is not appropriate for someone in a rehabilitation facility.. It should only be used for those clients who are likely to remain in the facility indefinitely and not return home.
3. The client must have some assets they wish to protect.
We believe every legacy is worth protecting, no matter how large or modest a client’s assets might be. However, in order to use an MCA, the client must have enough excess, countable assets at risk to warrant funding the annuity. The minimum investment amount required on an MCA is $5,000 in most states, but in many cases, clients can use alternative spend-down methods when dealing with an amount this small.
Furthermore, the client’s excess, countable assets must be accessible, in that liquid funds are needed to fund the MCA. If the client’s excess, countable assets consists of secondary real estate property such as a vacation home or timeshare, the property would first need to be sold before it can be used to fund an MCA.
There is no hard and fast limit to the amount of assets a client must have for an MCA to make sense, so if you’re unsure whether your client is the right fit, we encourage you to contact us! We will discuss the case facts and whether or not an MCA makes sense in this particular case.