If you or a loved one is facing the need for long term care, that is nursing home, assisted living or home care, you know how expensive it is. Medicaid planning utilizes legal and financial strategies to qualify for government programs like Medicaid to pay for long term care and save you and your family money. Annuities are a popular tool in Medicaid planning for both single individuals and married couples. This post will explain how annuities are often a great tool for married couples.
When one spouse needs long term care, it takes a financial toll not just on the individual but on the individual’s spouse as well. US Congress recognized this toll and wanted to provide some protection to a health spouse living in the community. It did this by establishing the Community Spouse Resource Allowance, a set amount of resources that the healthy spouse could keep, while still permitting the other spouse to receive Medicaid to pay for long term care.
The Community Spouse Resource Allowance (“CSRA”) is calculated by taking a couple’s total countable resources as of the time the one spouse goes into a nursing home or needs long term care, dividing it by two, and then subjecting that number to a minimum and maximum amount, adjusted for inflation. If a couple’s resources exceed the CSRA amount, then those resources must be disposed of in order for the unhealthy spouse to qualify for Medicaid.
It is a common misconception that the excess funds must be spent on care. They do not. In fact, the funds can be spent on anything that benefits the couple. However, not all couples want to spend the money at all. For those couples, a Medicaid Compliant Annuity is a good option. With a Medicaid Compliant Annuity, the healthy spouse can take the excess resources and convert them into an income stream. If planning is done right, one spouse has his care paid for by Medicaid and the healthy spouse has an income stream to pay for expenses Medicaid does not cover as well as well as expenses of maintaining the lifestyle of the healthy spouse.
The key to the effective use of an annuity is to ensure that the annuity complies with all relevant law and that it is part of a comprehensive long term care planning strategy. For that reason, any annuity should only be purchased with the oversight of a Cleveland Medicaid planning lawyer.