The terms Medicaid annuity, Medicaid friendly annuity, and Medicaid planning annuity are used in estate planning and elder law to describe a type of annuity purchased for the purposes of qualifying for Medicaid benefits and sheltering assets.While many insurance companies and brokers offer so called Medicaid friendly annuities, in order to avoid being counted as an asset for purposes of Medicaid, the annuity must be Medicaid compliant under applicable law, which means the annuity must meet several requirements. Unfortunately, many annuities sold as Medicaid friendly do not actually meet these requirements.
Asset Protection and Estate Recovery
Whether you need to provide for your spouse or want to leave an inheritance for your children or grandchildren, asset protection is a legitimate concern if you are facing an extended stay in a nursing home. Also, most people are not aware the government goes after assets in your estate to recover amounts Medicaid paid for your long term care. This process is called estate recovery. To learn more about asset protection strategies, estate recovery, Medicaid planning, and annuities, see Medicaid planning books.
Important Facts About Medicaid Annuities
1. The type of annuity used in Medicaid planning is IRREVOCABLE. You cannot get your money back if you change your mind or you no longer need long term care. Read the terms and conditions of your annuity contract thoroughly. Get legal advice before transferring assets to an annuity.
2. If you purchase an annuity to gain eligibility for Medicaid or reduce your spend down, be aware that the annuity you buy must be Medicaid compliant. If the state Medicaid agency determines the annuity you bought does not comply with state Medicaid rules, the annuity will not be treated as an exempt asset. This can result in ineligibility for government assistance to pay nursing home bills.
3. The rules regarding Medicaid eligibility, countable resources, and program requirements vary from state to state. While an annuity sold in one state may be Medicaid compliant in that state, it may not be compliant in your state. Some states restrict the use of annuities for Medicaid planning. BEFORE buying an annuity, consult an estate planning or elder law attorney about whether the annuity will allow you to qualify for Medicaid, how it will affect your spend down, and whether purchasing the annuity is the best option based on your situation and objectives. See finding an attorney.
4. It is not the job of the annuity salesperson, broker or agent to look out for your best interests. Financial advisors and insurance brokers are typically paid a commission, bonus or similar type of incentive compensation on the sale of annuities. Because selling an annuity usually results in a significant amount of money being paid to the sales person, they often gloss over or fail to mention the disadvantages of this type of product. While an annuity can be part of a sound Medicaid planning strategy, donít allow yourself to be rushed into this type of purchase. If you are being given a sense of urgency by the person selling the annuity, take a step back and do some more research before investing. Also, use caution when attending seminars offered by estate planning attorneys promising to protect your assets from nursing home expenses.If you are considering the purchase of an annuity to plan for Medicaid or protect an inheritance for your spouse or children, see Medicaid annuities for information on the advantages, disadvantages, and other important details.
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