Elder Law Library--16 Married Couple’s Use of an Annuity to Qualify for Medicaid and Protect Life Savings

Married Couple’s Use of an Annuity

to Qualify for Medicaid and Protect Life Savings

Let’s assume a married couple currently owns an investment account worth $600,000. However, the combined amount of what the married couple is allowed to own and still qualify for Medicaid is $128,900. The married couple already made the following moves to qualify for Medicaid and protect their life savings:

(1) Transferred assets without violating the 5yr look back rule;

(2) Took advantage of the 10 exempt resources, including your $450,000 home, $50,000 car and your spouse’s $350,000 retirement account that Medicaid doesn’t count when determining if your resources exceed the Medicaid limit;

(3) Transferred personal property and real estate to any of the exceptions to the 5yr look back rule that apply;

(4) Paid all your bills under the “spend down” option to protect your life savings; and

(5) Purchased a more expensive house and car.

But the married couple still has too much, $472,000 ($600,000 – $128,000 = $472,000), which is preventing them from qualifying for Medicaid.

Medicaid will allow the married couple to take the excess $472,000 and purchase an annuity that will turn the excess $472,000 into a fixed monthly payment for the spouse in the marital home. Remember, Medicaid doesn’t count the income of the Spouse living in the marital home when determining if the married couple qualifies for Medicaid. Therefore, if the annuity generates an additional $3,000 per month for the Spouse in the marital home, it doesn’t matter. Medicaid doesn’t’ count it.

If the married couple didn’t use the excess $472,000 to purchase the annuity, then they may have had to use it to private pay for nursing home care. At average annual cost of $117,516, it wouldn’t take long for the nursing home to completely wipe out the extra $472,000 in life savings.

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