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What Companies offer annuities that meet the Medicare requirements? I see several lawyers that are using this as an opportunity to sell annuties themselves....
What Companies offer annuities that meet the Medicare requirements? I see several lawyers that are using this as an opportunity to sell annuties themselves.
The law changed a few years back. You cannot effectively protect the income from being taken to pay for your own nursing home care with an immediate annuity. Be very careful with this. YMMV.
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Chuck
If you think your boss is stupid, remember: you wouldn't have a job if he was any smarter.”
Well, I have a client that is being advised by an elder law attorney and he says they need an annuity that is 1. irrevocable 2. non assignable 3. actuarilly sound(life expectancy or less) 4. contains equal payments 5. proper beneficiary designations(state named as contingent beneficiary). They are saying a 5 year period certain payout will do it, but they have reviewed numerous speciman contracts and cannot find a fit. I was told by another agent that he thought Lincoln Financial SPIA would fit. I surfed the internet and saw a websire of an elder law attorney that specialized nationwide in this type of business and on his bio page it said he was a top producer for Lincoln Financial and Employees Life Company. Of course I would love to find something that helps the client and get paid for it! 800k
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I failed to mention his wife is the one requiring care. I understand this type of annuity placement can be done using a community spouse provision.
Last edited by golfnut : 04-17-2009 at 10:56 AM.
Reason: Posts merged
OM Fianncial offers some and Legacy Marketing Group offers one also. I am not sure who else offers them currently.
You really need someone familiar with the laws in your area. If you have a good Elder Law attorney or friend in the Medicaid office you may be able to get by. They can be administered differently in each state and even some counties treat them differently so look for someone local to advise you.
They still work in many places only differently in many places than what they did in the past...
The best "Medicaid" annuity was a SPIA offered through Standard Life of Indiana; which went into receivership in December of 2008. Needless to say that it is not offered at the moment.
What you want to watch for is the IRR inside the SPIA, and the payout. I do not know if your state has a "look back" period; but this is another obstacle.
If there is a spouse that is still living then another technique that attorneys will use is "half-loafing." Whereby giving half of the assets, up to a pre-determined point, to the spouse that is not functionally incapacitated; therefore protecting his/her portion.
You will find that most state agencies are cracking down on this type of behavior, so I would proceed with caution. Let me know know if I can help........
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I appreciate the feedback guys. I am not worried about rules as the client has an attorney to tell him what is right. I jus twant to find a produc that fits and get the deal!
Once the attorney gives you the parameters, ask your IMO to research it. Unless the cost of care exceeds the income, Medicaid will never come into play. There are life expectancy tables, etc that will tell you the maximum number of years you can stretch out the income payments, but the income is going to go to the cost of the LTC facility. Whatever is left after death of course goes to the beneficiaries. Most annuity companies will not say their annuities are Medicaid friendly, those days are over. All you can do is follow the advice of the attorney and hope he fully understands Medicaid, in your state.
Essentially, what you're saying is that the attorney is recommending that $800,000 of assets be turned into an immediate annuity payable over 5 years. That means that the annuitant (in this case, the husband) will get 5 payments of about $160,000 per year for 5 years (maybe a little higher with interest.)
The problem is that the moment the husband receives the $160K check each year, his wife will immediately become DISQUALIFIED for Medicaid, because he's not able to keep anymore than $109,560.
In fact, after receiving the $160K check each year, he'll actually have to spend about half of it (about $80,000) before she can re-qualify for Medicaid.
Additionally, once the husband gets the $160,000 check in the second year, his wife will again be immediately disqualified from Medicaid, and he will have to spend his assets back down to below $109,000. Hence, if he had $80,000 leftover from the first $160K check, and then gets a second check for $160,000, that $240,000k would have to be spent down to below $109,000 before the wife will qualify for Medicaid again.
Hence, there's absolutely no point in turning this asset into an SPIA. The payments to him will be too big for her to remain on Medicaid. Additionally, if the husband dies before the 5 years of payments, the balance of the payments can go to reimburse the state!!!
Who do you think the kids are going to sue after they find out that happened?!?!?
The smartest thing for the husband to do would be to try to make the $800,000 last as long as possible. Invest it wisely. Skimp and save. And try to find the best care possible for his wife at the lowest cost. A nice assisted living facility is probably the best bet--lowest cost, comfortable surroundings, and 24 hour care, if needed.
In the regulatory environment in which we live, I think it's a risky bet to suggest that you would not be liable just because an attorney recommended it. I think they'd go after both of you.
It's stuff like this that really makes people wary of insurance agents... and rightfully so.
I suggest that before you take another step you get a copy of Harley Gordon's book, "In sickness and in health." You'll have a better understanding of how the system works and realize how bad this advice is.
P.S. The 'half a loaf' strategy would never have worked by giving assets from one spouse to another. For Medicaid purposes, assets that are held by one spouse are countable to the other spouse (even if there's a pre-nuptial agreement). Additionally, the 'half a loaf' strategy was nullified by the passage of the Deficit Reduction Act.
The post-DRA version of the 'half a loaf' strategy is for the entire estate to be gifted to a son/daughter and then the son/daughter HAS to pay for the care until at least half of the assets have been spent.
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A few more thoughts:
The average cost of a private room in a nursing home in most parts of NC is about $73,000 per year. They could probably find a top-of-the-line assisted living facility for a little less than that.
Assuming they can earn about 5% on the $800K, the interest alone would cover more than half the cost of the care.
The strategy you outlined would have made sense if they didn't have this much money.
Let's suppose they had $300,000 in countable assets (instead of $800,000). In order to qualify for Medicaid, they'd normally have to first spend $200,000 of the $300,000 on her care.
However, if they put $300k in an actuarially sound, 5 year period certain SPIA, (with the state as contingent beneficiary) then the husband could receive $60K per year for 5 years. That $60K would not be enough to disqualify the wife for Medicaid. He could live on it. He could enjoy it. He could use it to improve the quality of her care (with private nurses, etc...) And, as long as their countable assets stayed below the minimums, she'd continue to qualify for Medicaid.
So, the concept the attorney has outlined works for people with more modest assets. But, in this case, it just doesn't make sense to me.
Last edited by Never_a_dull_moment : 04-18-2009 at 09:23 PM.
Reason: Posts merged
Nice post but there is one correction. The DRA was implemented to try to keep people from transferring assets out of their name and make it more difficult to qualify for Medicaid. However, they have failed. To say that this has "nullified" the half-a-loaf concept is not true. I am sure that in some states that this is the case; but NOT in ALL.
(Reference CMS/Arkansas)
While most transfers are penalized with a period of Medicaid ineligibility of up to five years, certain transfers are exempt from this penalty;such as the half loaf concept. Even after entering a nursing home, you may transfer any asset to the following individuals without having to wait out a period of Medicaid ineligibility:
Your spouse (but this may not help you become eligible since the same limit on both spouse's assets will apply)
Your child who is blind or permanently disabled.
Into trust for the sole benefit of anyone under age 65 and permanently disabled.
In addition, you may transfer your home to the following individuals (as well as to those listed above):
Your child who is under age 21.
Your child who has lived in your home for at least two years prior to your moving to a nursing home and who provided you with care that allowed you to stay at home during that time.
A sibling who already has an equity interest in the house and who lived there for at least a year before you moved to a nursing home
That statement is incorrect.
You are reading something that is pre-DRA.
The half-a-loaf does not work anymore.
Please provide the actual link.
Also, are you suggesting that a spouse can "transfer assets to their spouse" and still qualify for Medicaid?
That's ridiculous.
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I just re-read your previous post. You stated earlier:
"If there is a spouse that is still living then another technique that attorneys will use is "half-loafing." Whereby giving half of the assets, up to a pre-determined point, to the spouse that is not functionally incapacitated; therefore protecting his/her portion."
In other words, you're saying that if they have $180,000 in countable assets, the healthy spouse can keep $90,000 of those assets. That is correct. That is still true. In fact, the healthy spouse can keep half of their assets UP TO $109,000.
But, that is not what the "half a loaf" strategy is.
Before the Deficit Reduction Act, the "half a loaf" strategy was where anyone could give half of their countable assets to their kids. The gifting of the assets would disqualify them for Medicaid for a period of time. During that period of time they would use the remainder of their savings to pay for their care. Once their savings had run out, the disqualification period would have been fulfilled.
For example, suppose someone had $800,000 in countable assets. Before the DRA, they could give $400,000 of those assets to their children/heirs. If care cost $8,000 per month in their state, the gift of $400,000 would have disqualified them for 50 months (because the $400,000 would have paid for 50 months of care.) The "disqualification period" started from the DATE THEY GIFTED THE ASSETS to the kids. During that 50 month "disqualification period" they would simply use the remaining $400,000 of their assets to pay for their care. Once that was used up, they could qualify for Medicaid.
Essentially, half the assets are gifted to the kids. The other half is spent on one's care. Once the other half is used up, they can then qualify for Medicaid.
The DRA outlawed that. With the passage of the DRA, the "disqualification period" starts from the day that they apply for Medicaid NOT from the day they gift the asset.
So, insurancexec, you are correct in saying that the healthy spouse can keep "half of their countable assets" up to a pre-determined limit (that limit is a little over $109,000).
But, that is NOT the "half a loaf" strategy that was employed by Medicaid planners before the DRA.
Last edited by Never_a_dull_moment : 04-19-2009 at 01:38 AM.
Reason: Posts merged
Why would anyone who is old with $800k think they can shelter the money and get on Medicaid? Based on an actuarially sound SPIA the income will more than cover the cost of care with money left over no matter how you split it up or assign it. Anyone who has that kind of nestegg should have bought LTCi if they didnt want to self insure.
Medicare Compliant Annuities
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