Is an annuity exempt from Medicaid's "spend down"?
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No annuity is exempt from being counted as an available resource UNLESS procured immediately before submission of the Medicaid application. Anytime I hear use of annuities as a pre planning tool it throws up a red flag of bad information being provided.
For Married couples an alternative to the gifting route you could utilize a Medicaid Qualifying Annuity to shelter some costs. Medicaid qualification criteria look to the income of the applicant and the assets of both spouses. One requirement of this annuity is that the State of Washington must be named as the primary beneficiary before the community spouse. Another downside to using an annuity to convert resources to income is that the income that comes in the name of the community spouse will most likely preclude you from requesting an income allocation from the applicant to the community spouse.
For single person, under Medicaid rules, you are not able to utilize an annuity in the traditional sense of sheltering your excess assets by converting them into a stream of income. However, since you will be gifting some of your assets, which will cause a period of ineligibility, you can minimize your penalty by annuitizing a sum which, when added to your monthly income, will give you adequate income to meet your monthly long-term care costs.
I reading your article re: is an annuity exempt from Medicaid’s “spend down” severl questions come to mind. 1. There are three parts to a CGA: the income, the principal and the remainder. If a spouse takes out a 100,000 charitable gift annuity, you are saying the beneficiary must be State of Washington who will take the income from the annuity. Will/Can the State also place a lien on the pricipal, jeopardizing the reaminder interest to the beneficiary (charity)?
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You have presented some interesting points in this article. It’s a lot of information to take in, but it’s so well-formatted that it’s easy to grasp. Thank you for writing this kind of quality material. Rock on
Hi Peter: there is a significant difference between a Charitable Gift Annuity (CGA) .
and a Medicaid Qualifying Annuity (MQA). The purposes are different and the requirements are different. A CGA has no requirement to name the state as beneficiary but works only for tax issues. Has no protection for medicaid and medical costs. A MQA, on the other hand, has protection for Medicaid and medical cost purposes but may or may not have any tax benefits (depending on how the ownership and other aspects are structured). As to a CGA being used for Medicaid, both principle and income are going to impact the qualification. Generally, it takes the sale or transfer of such an annuity to get the taint out. In summary, annuities are very complicated for Medicaid purposes and easy to mess up qualification unless care is taken to get the right provisions in the contract. Because the contracts are generally irrevocable they are expensive to get out if not set up correctly. Hope this helps. Rajiv.
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