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Medicaid Planning for a Married Couple

Hi, I’m Amy Beacham, and I’m the Communications Director for Krause Financial Services. Today, we’re going to talk about crisis Medicaid planning for a married couple. If you haven’t already, check out our “Introduction to Medicaid Planning” and “Medicaid Compliant Annuities” videos before watching this one.

As we’ve mentioned in our other videos, using a Medicaid Compliant Annuity, or MCA, is a quick and easy way to spend down a Medicaid applicant’s excess countable assets and accelerate their eligibility for benefits. When dealing with a married couple, the most common strategy is to fund their excess countable assets into an MCA for the community spouse. If you live in a standard Community Spouse Resource Allowance, or CSRA, state, it’s easy to calculate how much should be funded into the MCA. Any assets above the CSRA that are not spent on funeral trusts, home improvements, legal fees, or debts can be eliminated through the MCA purchase. If you live in a Minimum/Maximum CSRA state, the strategy is the same. However, your clients must first establish the snapshot date, or the date in which the institutionalized spouse first entered a facility on a continuous basis. This will provide the foundation for how much your clients can keep and how much must be spent down.

One of the biggest questions we receive is, “How long should my client’s MCA term be?” In order to be Medicaid compliant, the term of the annuity must be equal to or less than the owner’s Medicaid life expectancy. The short answer to this question is, “The term can be as short or as long as you and your client see fit.”

You may want to consider a longer term to minimize the monthly income if your client would be eligible for an income shift from the institutionalized spouse under the Monthly Maintenance Needs Allowance, or MMNA, rules. You may want to use a shorter term if the community spouse has high monthly shelter expenses that would not be covered by the MMNA. A shorter term may also be appropriate if the community spouse is in poor or questionable health. The goal, in this case, would be for the term to end before the community spouse enters a nursing home or passes away so we can avoid estate recovery on the annuity. We have the ability to use an MCA term as short as two months in most states, though we recommend the term not be so short that it creates an unreasonable amount of income.

Another common question is whether it’s ever appropriate for the institutionalized spouse to be the MCA owner, and the answer is: absolutely. If the couple you’re dealing with has a very low monthly income in which all the institutionalized spouse’s income and the MCA income would be shifted under the MMNA rules, the institutionalized spouse can purchase the MCA in their name. The benefit of this option is the community spouse can be named primary beneficiary ahead of the state Medicaid agency. If the institutionalized spouse predeceases the annuity term, the community spouse can cash out the remaining funds or continue receiving the payments under a new contract.

Another situation in which the institutionalized spouse might purchase the annuity is when using the “Name on the Check Rule.” This is used when the institutionalized spouse owns an IRA. In some cases, the IRA can simply be annuitized, and the community spouse will receive the payments under the MMNA rules. But in cases where the couple’s total income exceeds the MMNA, this strategy is a great solution. The institutionalized spouse still purchases the MCA in their name but designates the community spouse as payee. For Medicaid purposes, the income is deemed to only belong to the community spouse. Note the success of this strategy varies from state to state.

For more information on planning for a married couple and for a complimentary case analysis, contact our Benefits Planners at 855-552-5893.

I’m Amy Beacham, and thanks for watching.


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