MEDICAID COMPLIANT ANNUITY

A Medicaid Compliant Annuity is a powerful tool that helps elder law attorneys achieve a better solution for clients facing a costly nursing home stay. This innovative product achieves accelerated Medicaid eligibility, asset preservation, and peace of mind. A Medicaid Compliant Annuity is a single premium immediate annuity (SPIA) with restrictions that met the strict federal Medicaid rules found in the Deficit Reduction Act of 2005 (DRA):

The DRA requires that if an annuity is "Medicaid Compliant", it must:
Be Irrevocable.
The annuity contract cannot be revoked and the parties to the contract cannot be altered.
Be Non-Assignable.
The annuity contract cannot be assigned to another party and cannot be sold on the secondary market.
Be Actuarially Sound.
The term of the annuity must be fixed and must be equal to or shorter than the owner’s Medicaid life expectancy. This figure is determined by the life expectancy table published by the Chief Actuary of the Social Security Administration, or by a state’s specific life expectancy table, as outlined in each state’s Medicaid manual.
Provide Equal, Monthly Payments.
The annuity contract must provide equal, monthly payments, with no deferral or balloon payments.
Name The State Medicaid Agency as Beneficiary.
In most cases, the state Medicaid agency must be named primary death beneficiary to the extent of benefits paid on behalf of the institutionalized individual. Exceptions to this rule vary from state to state, but may apply in certain cases involving a married couple, or a minor or disabled child. If a particular case qualifies for an exception, the state Medicaid agency likely must be named contingent beneficiary.
Properly structured, this annuity functions as a spend-down tool that eliminates excess countable assets, allowing the nursing home resident to become eligible for Medicaid benefits. Its purchase does not create a transfer penality, and is not considered an asset. Instead, an MCA turns cash assets into an irrevocable income stream
A Medicaid Compliant Annuity is right for your client if they:
Are residing in a nursing home and is not expected to return home.
Are not expected to pass in the near future.
Have exhausted all Medicare and long-term care insurance benefits and has been asked to self-pay.
Have excess countable assets.

Spousal Medicaid

A married couple that is seeking Medicaid benefits for one spouse can preserve their assets for the community spouse through a Medicaid Compliant Annuity.

View Case Study

Gifting/MCA Plan

A single individual seeking Medicaid benefits can preserve their assets through a Gifting/MCA Plan.

View Case Study
Product Availability
History
FAQs
Medicaid Eligibility Requirements
Product Features

Krause Financial Services has product availability in almost all 50 states. If you have any questions about the availability of Medicaid Compliant Annuities in your state, please contact us.

 

Krause Financial Services has offered annuities to accelerate Medicaid eligibility since the early 1990’s. Several federal laws and regulations have altered the structure and strategy over the years, but the basic planning concept remain the same: Utilize a properly structured immediate annuity to convert excess assets into an income stream, thereby accelerating Medicaid eligibility.

The Omnibus Budget Reconciliation Act of 1993 moved annuity regulation to the Secretary of Health and Human Services. This agency issued Transmittal 64 in 1994, requiring annuity terms to be actuarially sound. The next major change came over 10 years later, with the Deficit Reduction Act of 2005 (DRA), which set out the five basic requirements for an annuity to be deemed “Medicaid Compliant”.

Q: WHAT IS A MEDICAID COMPLIANT ANNUITY (MCA)?

A: A MCA is a spend-down tool utilized by elder law attorneys to help their clients qualify for Medicaid benefits. From a technical standpoint, a MCA is a Single Premium Immediate Annuity (SPIA) with added restrictions to meet the requirements of the Deficit Reduction Act of 2005. The SPIA is irrevocable, non-assignable, provides equal monthly payments, and contains zero cash value. Additionally, the SPIA must be structured to be “actuarially sound” in accordance with each state’s Medicaid manual, and must name the State Medicaid agency as primary remainder beneficiary (in most cases). Visit our “Medicaid Compliant Annuity” page for more details and case study examples.

Q: WHO OWNS THE ANNUITY? TO WHOM IS THE ANNUITY PAYABLE?

A: The parties of an annuity contract vary depending on the case facts. In most married couple cases, the community spouse is owner and payee. In single person cases, the applicant for Medicaid is both the owner and payee. Payments are not made in the name of the nursing home or in the name of a client’s Miller Trust. In most cases, the only time the owner and payee of contract are different individuals is when utilizing the “Name on the Check Rule.” This is where an institutionalized spouse names his or her community spouse as the recipient of the annuity funded with IRA funds.

Q: WHAT IS THE MINIMUM PREMIUM AMOUNT TO FUND A MEDICAID COMPLIANT ANNUITY?

A: We can offer a minimum premium amount of $5,000 in most states. Please talk to a benefits planner for details.

Q: WHAT IS THE MINIMUM TERM LENGTH FOR A MEDICAID COMPLIANT ANNUITY?

A: We can offer a minimum term length of two months in most states. Please talk to a benefits planner for details.

Q: WHAT HAPPENS IF THE OWNER OF THE ANNUITY OUTLIVES THE TERM?

A: An annuity will make a fixed number of payments, which end at the completion of the annuity term. If the owner outlives the term of the annuity, the annuity contract will automatically terminate.

In order to qualify for Medicaid, an individual must meet non-financial and financial requirements.

To meet the non-financial requirements, an individual must be a U.S. Citizen or qualified alien, age 65 or older, blind, or disabled, and in need of nursing home care.

 

To meet the financial requirements, and individual must have limited income (varies by state, but typically must be less than nursing home private pay rate), and have limited assets (amounts vary by state but are typically $2,000 for an institutionalized individual and $120,900 for a community spouse)

The Medicaid Compliant Annuity has terms as low as two months, in most states. Most states only require a $5,000 minimum investment as well. Medicaid Compliant Annuities can be issues for ages 0 to 100 and may be purchased with tax-qualified funds.