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Immediate Annuities in Medicaid Planning for Married Couples

Posted by Brad Sarkauskas | Apr 16, 2018 | 0 Comments

When the time comes to consider the possibility of Medicaid in your estate planning, one of the most important aspects is “spending down assets” to reach the personal income limit of $2,000. There are a number of non-countable assets you can keep, and you can also convert cash into non-countable assets as well.

If you're married, you may be concerned about providing for him or her if you have to go to a nursing home one day. Medicaid requires you to be “impoverished,” but what about your spouse? One option can solve this dilemma.

The Immediate Annuity

There are a number of ways to preserve the money you have, including various types of annuities, which can also help you avoid market risk. These will pay the investor a fixed sum of money every month, year, or at other regular intervals. How much you receive will depend on how much you invest and the duration of your annuity contract.

An annuity is a financial product that you can purchase from a life insurance company or investment company and start receiving payments right away. They're ideal for retirees who want a guaranteed income stream as well as anyone who finds themselves with a large lump sum of cash. The idea is that your money is safely invested, you'll receive a regular monthly income, and you won't outlive your assets. This illiquid investment is intended for those seeking a regular income from it, rather than an investment for the short term.  

A deferred annuity is one where payments don't start until later. These annuities are also tax-deferred, which means you won't pay tax on them until you actually withdraw money.

Protecting the Assets of Married Couples

As part of your “spending down” activity, the immediate annuity transfers a sum of money to your spouse without penalty. However, there are some conditions that you should know about before you purchase immediate annuities.

  • The annuity must repay 100% of your investment
  • In the case of Medicaid planning, the annuity must be shorter than the life expectancy of the spouse going into the nursing home. For instance, if one spouse is expected to live no more than 5 years, the annuity must be less than that. Anything longer and the annuity will not be “Medicaid compliant,” and will be considered a transfer within the five-year lookback period
  • The annuity must be non-transferable, irrevocable and non-assignable. This means that the owner can't sell it to a third party to get the cash out of it
  • Should the owner die before the nursing home spouse, the next beneficiary must be the Wisconsin Medicaid program to the extent of the spouse's benefits while in the nursing home

Are Immediate Annuities Right for You?

Depending on your circumstances, an immediate annuity may be able to preserve your wealth and make sure your spouse has income if you are going into a nursing home using Medicare. A licensed elder law attorney and investment advisor can help you decide if these annuities would be beneficial.

A qualified elder law attorney is well-versed in the laws surrounding Medicaid and how to properly qualify. Congress continually changes legislation regarding Medicaid, so to be sure you have the most up-to-date information it's wise to talk to an attorney.

Start your Medicaid planning long before you need it. The earlier you can set up your estate plan, the easier your transition will be. Brad Sarkauskas has been helping people in Milwaukee with their estate planning for over 20 years. We are dedicated to providing you with the knowledge to properly handle elder laws and prepare for long-term care. Contact our office by calling (414) 253-8500 for a free case evaluation today!

Bradley J. Sarkauskas, Attorney-at-Law

About the Author

Brad Sarkauskas

As the founding member of the Heritage Law Office of Wisconsin, LLC, attorney Brad Sarkauskas is equipped with the tools--through his extensive background in finance--to effectively represent his clients legal economic interests. With over 20 years of experience in finance, insurance, and taxati...


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