There's no such thing as a Medicaid annuity. Annuities can however help some people shelter assets so that they can get Medicaid benefits. The reader is encouraged to consult an elder care attorney in your local area to understand the laws that apply in your state. Medicaid rules vary from state to state so the following discussion is a general discussion of federal rules. Once annuities are explained, they are not difficult to understand.
Some retirees have concern about paying for ill health in later years. One strategy is to exhaust one's assets and then qualify for Medicaid support. Understandably, most people are not eager to exhaust their assets and thus, you will benefit by having Medicaid annuities explained. Annuities are a deposit with a life insurance company. The insurance company guarantees your principal and pays you interest. For Medicaid qualification purposes, annuities are an exempt or non-countable asset and can be retained by the person who also gains Medicaid benefits. Therefore, one can qualify for Medicaid but still own a sizable annuity and need not be 'broke." But that annuity must meet the following criteria:
- It must be an immediate annuity or deferred annuity that is now being annuitized (i.e. making payments of principal and interest).
- The guaranteed payments must be for the life of the owner or term certain shorter than the owner's life expectancy.
While the state Medicaid authority will generally not force the person opting for Medicaid to liquidate the annuity (as they would with cash or other countable assets), the annuity payments that the person receives will be taken by the Medicaid authority to offset the state's outlay of supporting the ill person. Once you have a little more on annuities explained, you'll soon see how you can come out ahead.
Let's take the hypothetical case of Mrs. Johnson age 85 who buys an immediate annuity after she has immediate annuities explained to her and understands the benefit of the lifetime income and holding a non-countbale asset. Her investment is $150,000 and she has no other assets. Her income from the annuity is $1500 per month (in addition, she gets Social Security benefits of $700 per month). Her income of $2,200 is below her state's income cap (some states won't provide Medicaid support to those with income above specific levels). She has very modest financial requirements and is able to live on the above income. However, should she need to go to a nursing home, she will qualify for Medicaid because she is 'penniless' as the annuity is not counted as an available asset.
So we see that once we have immediate annuities explained as a health care planning tool, they become a viable consideration. However, because annuities are not treated consistently from State to state, before making a plan like Mrs. Johnson, consult a local elder care specialist and have annuities explained as they are treated in the state where you will spend your retirement.
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