These are special annuities used in certain cases to help convert excess assets to income. The Deficit Reduction Act (and its predecessor, Transmittal 64), define what type and kind of annuities will achieve this objective. These annuities are the only way to protect countable qualified assets (e.g., IRA, 401(k), SEP, 403(b), Roth, etc.) from a Medicaid spend down.
The term “Medicaid annuity” or “Medicaid compliant annuity” refers to an immediate annuity which meets all of the requirements under the Medicaid rules to not be considered an asset. In most cases where you transfer an asset and it no longer has any value to the patient (or the patient’s spouse, if any) that is considered a divestment for which there are penalties. When an immediate annuity is purchased, if the annuity does not meet Medicaid’s requirements, it is also considered a divestment and can cause huge problems for the patient.
Where many people get confused is with the annuities they already have which are “deferred.” In other words, those annuities are not in pay-out mode. An annuity that is not in pay out mode is considered a fully countable asset available to be be spent towards the cost of care.
An immediate annuity is an annuity in pay-out mode. But not all pay-out modes meet the Medicaid requirements. So sometimes when choosing a pay-out mode, many people make the mistake of choosing the wrong option, resulting in a Medicaid penalty when they eventually need care.
When used right, a Medicaid annuity can be designed to convert assets into an income to help abate the spend down — especially when the income stream is sent to the healthy spouse who can use the money to live on.
Medicaid annuities should be considered when attempting to save/protect the following countable assets:
- Certificates of Deposit
- Deferred Annuities
- Individual Retirement Accounts (IRAs)
- Whole/Variable Life Insurance Cash Values
- Any Qualified Investment (IRA, 401(k), 403(b), Keogh, Roth, SEP, etc.)
If you have any of these assets you should contact us to see if a Medicaid annuity is right for you. Our annuity team has the best annuities available to assist you in protecting assets. Not all annuities are the same. Just because they meet the Medicaid rules doesn’t mean they are cookie-cutter contracts. Often, the contracts need to be tailored to each person’s circumstances. Our team not only knows how to do this, we train financial advisors and annuity agents on how this is done.
Call us or email us to see if Medicaid annuity can help you protect your assets!