PA Annuity - PA Care Management, Inc.

Medicaid Annuity Report

August 2007

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James v. Richman Decision                                     Amended Annuity Provisions

Annuity Planning for the Community Spouse

Written By: Jeffrey A. Marshall , CELA*

Annuities have become an increasingly powerful planning tool for protecting the financial security of a community spouse. Both the federal law and Pennsylvania policy allow a community spouse to purchase an annuity as a way to “spend down” a couple’s excess resources. As a result, the institutionalized spouse may become immediately eligible for Medicaid.

The Wall Street Journal Describes Medicaid Annuity Planning

A recent Wall Street Journal article discussed the post Deficit Reduction Act (DRA) use of annuities to protect assets for the community spouse. Here is part of that article.

More than a year has passed since the federal government changed the rules for qualifying for Medicaid assistance for long-term care, and experts in the field are still sorting out the implications for those who want to pass assets on to their children.

The new rules made it tougher, for example, to give gifts to children or grandchildren to help pay for their college education. Individuals who make such gifts can find themselves ineligible for Medicaid benefits after they're already in a nursing home.

But estate-planning experts say some options remain open for those who want to pass on some assets, such as a home, through a trust, or preserve some income for a spouse in certain kinds of annuities...

Using an Annuity

The changes to the Medicaid rules also tightened -- but left somewhat open -- another planning loophole. It used to be that many annuities were not counted as an asset when determining Medicaid eligibility. It's still possible to put money in an annuity and have the funds protected, but there are now greater restrictions.

Here's how it would work:

If a couple has $200,000 in assets and one spouse has to go into a nursing home, the rules would likely require spending half that money before the ill spouse is eligible for Medicaid. However, by putting $100,000 into an annuity, the healthy spouse could collect the income off the annuity and the spouse in the nursing home would be eligible for Medicaid.

"You're converting a countable resource into one that's not countable," says Mr. Marshall. [The “Mr. Marshall” being quoted at this point in the Journal article is yours truly, Jeff Marshall.]

However, the law put in place added guidelines that an annuity must meet to avoid being counted as a transfer of assets that would lead to ineligibility.

For example, it has to be irrevocable and has to be an immediate annuity -- which means your investment is turned into an income stream with equal payments right away without any deferral.

What's more, the state needs to be named as a beneficiary to cover the cost of the medical treatment paid on behalf of the institutionalized person.

If the annuity isn't set up properly, your state could deny Medicaid benefits. "Be wary," says Mr. Bouklas. [Philip Bouklas is a New York lawyer.]

The Wall Street Journal article “Nursing Homes, Medicaid and Your Assets” is featured in the paper’s July 22, 2007 Sunday edition, and the July 24 regular edition of the Journal. It is available online through the Wall Street Journal website at the following link: http://online.wsj.com/article_print/SB118498132532773712.html.

The column is also available online through Yahoo. Paste the following link into your browser.

http://biz.yahoo.com/wallstreet/070722/sb118498132532773712_id.html?.v=1.

The Wall Street Journal article is correct. If the provisions of the law are met, the purchase of a DRA-compliant annuity by the community spouse will be treated as neither a transfer nor a resource. In this way, a couple’s countable resources can be reduced to the point where the spouse who needs care will qualify for Medicaid funded nursing home or home waiver services. The cash that is converted to income is recouped over time as annuity payments are made to the community spouse.

Pennsylvania specific information on how you can use a DRA compliant to protect the financial security of a community spouse is available on the PCM website. Just click on the following link http://www.paannuity.com/avoiding_traps.html.

*Attorney Marshall is Certified as an Elder Law Attorney by the National Elder Law Foundation under authority of the Pennsylvania Supreme Court. He is Managing Attorney of the Law Firm of Marshall, Parker and Associates with offices in Williamsport, Jersey Shore, Wilkes-Barre, and Clarks Summit, PA. He can be contacted at webmail@paelderlaw.com.

_____________________________________________________________________

PCM

Pennsylvania’s trusted source for Medicaid Annuities

49 East Fourth Street , Williamsport , PA 17701

570-326-1890

www.paannuity.com

webmail@paannuity.com

______________________________________________________________________

If you would like to be added or removed from our mailing list, please e-mail PCM at webmail@paannuity.com.

_____________________________________________________________

PCM

Pennsylvania’s trusted source for Medicaid Annuities

49 East Fourth Street, Williamsport, PA 17701

570-326-1890

www.paannuity.com

webmail@paannuity.com

_____________________________________________________________

If you would like to be added or removed from our mailing list, please e-mail PCM at webmail@paannuity.com.

_____________________________________________________________

For further information, please contact:

Matthew J. Parker, Esq., CELA*    mparker@paannuity.com

Patti Jo Turner, BSEd          pturner@paannuity.com

PCM

49 East Fourth Street
Williamsport, PA 17701
570-326-1890

webmail@paannuity.com

* Certified as an Elder Law Attorney by the National Elder Law Foundation.