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How to Use Community

Spouse Annuities

Larger Version

Frequently Asked Questions

 

1. Does Pennsylvania permit the use of spousal annuities?

2. Is there a limit on the size of the annuities?

3. When does my client buy the annuity?

4. What term can I use for the annuity?

5. Do I need to name the Department of Public Welfare as a beneficiary of the spousal annuity?

6. How long does it take to get the annuity purchased?

7. When is the purchase of the annuity effective?

8. What happens if my client dies during the term of the annuity?

9. Can these annuities be purchased from any insurance company?

10. Do I need to get three quotes?

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  1. Does Pennsylvania permit the use of spousal annuities?

Answer:  Yes.  Pennsylvania’s Department of Public Welfare has authorized the use of spousal annuities. 

 

 

  2.  Is there a limit on the size of the annuity?

Answer:  Federal Third Circuit Cases of James v. Richman and Weatherbee v. Richman have rejected the attempts of the Department to limit the annuity size.  Therefore, a community spouse in Pennsylvania can purchase an annuity without regard to the size.

 

If a single person is purchasing an annuity in an attempt to begin an ineligibility period caused by a gift, the payment from the annuity, when combined with other income sources, should not exceed the private pay rate of the nursing home.  Otherwise, the applicant may be ineligible for Medicaid benefits for a reason other than the gift.

 

 

    3.  When does my client buy the annuity?

Answer:  The client needs to be nursing facility clinically eligible before the annuity is purchased. 

 

 

    4.  What term can I use for the annuity?

Answer:  The term cannot exceed the life expectancy of the annuitant as defined by Social Security Life Expectancy Tables.  The term can be shorter than the life expectancy, but cannot exceed it.  

 

 

 

    5.  Do I need to name the Department of Public   Welfare as a beneficiary of the spousal annuity?  

Answer:  Yes.  In Pennsylvania, you need to name the primary beneficiary as the Pennsylvania Department of Public Welfare up to the amount of Medicaid paid to the institutionalized person.   Thereafter, you can name contingent beneficiaries.  The exception to the rule is that you may name your spouse or a disabled child as beneficiary before the Department of Public Welfare. 

 

 

 

    6.  How long does it take to get the annuity purchased?

Answer:  Generally, you can get a quote for an annuity within 24 hours.  The turnaround time for purchase of the annuity can take 1-3 days. 

 

 

 

    7.  When is the purchase of the annuity effective?

Answer: Generally, it is the date the annuity contract is signed and check is written for the premium.   We recommend using a cashier’s check.

 

 

 

    8.  What happens if my client dies during the term of the annuity?

Answer:  The Department of Public Welfare’s Estate Recovery Division must be notified of the Medicaid recipient’s death.  The Department will then send written notice of the Department’s claim, if any.  The claim can be paid from the balance of the annuity.   The annuity payments will continue to be paid to the Department until such time as the Department’s claim is paid in full or the payments cease. 

 

 

 

    9.  Can these annuities be purchased from any insurance company?

Answer: Not all insurance companies sell Medicaid Qualifying Annuities.  The endorsement required on the annuity must meet Federal Medicaid requirements.  Only a handful of companies currently sell this product.

 

 

 

    10.  Do I need to get three quotes?

Answer:  You only need to get three quotes when you are using the spousal impoverishment provisions of the Medicaid Act.  If you have a low income, low resource couple, it often makes sense to divert all the institutional spouse’s income to the community spouse and then request that additional resources be retained if the community spouse’s income is still below the monthly maintenance needs allowance.

 

The amount of resources that the community spouse can retain will be determined based upon three annuity quotes.  These quotes will determine how large a premium is needed to generate the income shortfall from the maintenance needs allowance.  The annuity in this case need not be purchased.  The quotes are simply guidance to determine the amount of additional resources that the community spouse may retain.

 

   

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