When a client acts proactively and seeks assistance from a financial advisor and elder law attorney, we refer to that as long-term care planning. This allows the team to review all the assets held by the client and create a strategy to pay for long-term care that minimizes as much as possible the depletion of assets that can be used by a spouse or later inherited by beneficiaries.
While it is highly recommended that clients tackle this advance planning, for various reasons, many find themselves instead in need of Medicaid crisis planning. This occurs when one spouse needs to live in a nursing home and the couple is distraught over the costs and what will be left for the healthy spouse.
One popular crisis planning tool is to purchase a Medicaid annuity in the institutionalized spouse’s name for the benefit of the healthy spouse. It allows the clients to convert countable assets into an income stream for the healthy spouse while not disqualifying the other spouse from Medicaid eligibility – assuming other factors exist for that eligibility.
When someone applies for Medicaid, the assets are viewed jointly with a spouse. Medicaid will allow a healthy spouse to keep up to $137,400 in assets (cash, investments, bank accounts) that will not be counted. Anything above that amount will need to be paid toward the long-term care costs of the spouse in need. Unless, the couple uses that amount to purchase an annuity that can provide income to the healthy spouse based on life expectancy.
There are some requirements of the annuity:
- The state must be named as the remainder beneficiary for at least the amount that Medicaid paid for long-term care. This does not impose limits on the healthy spouse’s ability to enjoy the income stream but means that if both spouses do not survive the Medicaid annuity payout period, the state will recover benefits it paid before allowing subsequent heirs to partake.
- The income payments cannot be deferred. The healthy spouse must start taking income immediately.
- The annuity it irrevocable.
We encourage clients to schedule a consultation long before they are in need of crisis planning. Whether you need long-term care planning or crisis planning, contact the experienced attorneys at Stouffer Legal in the Greater Baltimore area. You can schedule an appointment by calling us at (443) 470-3599 or emailing us at office@stoufferlegal.com.
