Community Spouse Medicaid Annuity Planning: Easy as Pie

Nov. 3, 2014 - PRLog -- Each year the states update their spousal impoverishment standards (http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Eligibility/Downloads/Spousal-Impoverishment-2014.pdf).  This includes but is not limited to the monthly maintenance needs allowance (http://youtu.be/gojj4ZffkfY), the shelter standard, and the standard utility allowance.  While those standards and their derivations can be confusing, community spouse planning with annuities doesn’t have to be.

Community Spouse Planning Step 1:
Determine the Investment Amount
From the total countable resources, both the community spouse and the institutionalized spouse are entitled to retain certain amounts.  The amount of resources in excess of these limitations is deemed the “spend-down amount.”

The easiest way to eliminate the spend-down amount is to convert countable resources into non-countable resources – purchasing a prepaid funeral plan, paying off an existing mortgage, making home improvements, purchasing a new automobile, or paying off existing bills.  If the entire spend-down amount is still not eliminated, the couple may purchase a Medicaid Compliant Annuity (http://www.medicaidannuity.com/products/medicaid-complian...).

For example…

$350,000 Countable Resources
-$117,240 Community Spouse Resource Allowance
-$2,000 Institutionalized Spouse Resource Allowance
$230,760 Spend-Down
-$7,000 Prepaid Funeral
-$30,000 Home Improvements
-$4,000 Credit Card Bills
$189,760 Medicaid Compliant Annuity Investment

Community Spouse Planning Step 2:
Determine the Appropriate Length
Several factors need to be taken into consideration when determining the appropriate length of a community spouse’s Medicaid Compliant Annuity.  Above all else, it is highly recommended that it no be so short as to create an unreasonable amount of income (e.g. the NASMD letter (http://www.medicaidannuity.com/wp-content/uploads/2014/07...)).  The total monthly income received should be reasonable in light of the annuitant’s current and future monthly needs.

It may be best to “go short” if…

The community spouse is in poor health;
The spend-down amount is very small
The community spouse has excessive monthly expenses;
The community spouse ha very limited monthly income; or
The planning goal is to return all funds to the community spouse as soon as possible in that the community spouse’s future placement is uncertain – may transfer to an assisted living facility or nursing home in the near future.

On the other hand, it may be best to “go long” if…

The community spouse is in excellent health and has a family history of longevity;
The spend-down amount is large;
The community spouse has minimal monthly expenses;
The community spouse has excessive monthly income;
The spend-down amount consists of tax-qualified funds – stretching out the investment will minimize the federal income tax consequences;
The planning goal is to provide a steady stream of guaranteed income to the community spouse for his or her entire lifetime; or
The community spouse will receive a shifting of income from the institutionalized spouse.

Community Spouse Planning Step 3:
Determine the Beneficiaries
In 95% of community spouse cases, the community spouse will be the owner, annuitant, and payee.  However, certain circumstances may dictate that the institutionalized spouse should be the owner/annuitant/payee (http://www.medicaidannuity.com/the-parties-to-an-annuity-3/).

Generally speaking, if the community spouse is the owner…

PRIMARY: The [State Medicaid Agency] for at least the total amount of medical assistance paid on behalf of the institutionalized individual, namely [institutionalized individual's name].
CONTINGENT: Annuitant’s choice.

Also generally speaking, if the institutionalized spouse is the owner…

PRIMARY: The community spouse.
CONTINGENT:  The [State Medicaid Agency] for at least the total amount of medical assistance paid on behalf of the institutionalized individual, namely [institutionalized individual's name].

EXCEPTIONS CAN ALWAYS APPLY!
Each state has exceptions to beneficiary designation requirements (http://youtu.be/jBnr7Sp3uvQ).  Some states will allow a community spouse to designate his/her institutionalized spouse before the State Medicaid Agency.  Some states don’t require the State Medicaid Agency to be a beneficiary on annuities owned by a community spouse.  And the list can go on.



Visit your state-specific page (http://www.medicaidannuity.com/resources/state-resource/) to see what kinds of planning anomalies exist in your state.

Download a printer-friendly version of this page. (http://www.medicaidannuity.com/wp-content/uploads/2014/07/CS-crisis-planning.pdf)
If video is more your thing, watch this YouTube video regarding the ins and outs of spousal planning with annuities. https://www.youtube.com/watch?list=UUme9n17DUu2I4weG3iABYzQ&v=UBTuw9FUQZU