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Community Spouse Medicaid Compliant Annuity Purchase Sequence
This article gives a thorough explanation of the steps to purchase a community spouse Medicaid Compliant Annuity.
In that community spouse are typically not required to adhere to as strict income and resource requirements as their institutionalized counterparts, much uncertainty and unclear guidelines exist surrounding community spouse Medicaid Compliant Annuity planning. The most common question I receive applies to the timing of the purchase of the community spouse's Medicaid Compliant Annuity. The timing will heavily depend on how the respective Medicaid agency determines the community spouse resource allowance ("CSRA").
Step One: Complete a Resource Assessment.
In the 37 states1 that impose a minimum and maximum CSRA, a resource assessment must be performed in order to determine the actual CSRA. The resource assessment is performed by:
1. Determining the first date after which the Medicaid applicant first spent 30 days of consecutive institutionalization2;
2. Determining the total countable resources on that date, then dividing the total countable resources amount by half;
3. Utilizing the resulting figure as the actual CSRA, keeping in mind that the resulting figure should never be less than the minimum CSRA, and never be more than the maximum CSRA.
The resource assessment completes two tasks. One, it ensures that all assets are counted as of the date of continuous institutionalization, not the date of the Medicaid application. Two, it informs the couple as to what assets the Medicaid agency considers available to the institutionalized spouse.
For the 14 states that do not impose a minimum and maximum community spouse resource allowance, the community spouse is entitled to a standard allotment regardless of the amount of countable resources. As such, in those states, a resource assessment is not necessary.
Step Two: Determine the Medicaid Spend-Down.
If a couple has countable resources in excess of the CSRA and individual resource allowance, the excess amount is deemed the "spend-down amount."
After determining the CSRA and individual resource allowance, those amounts are deducted from the total countable resources. The remaining countable resources are considered available to the institutionalized spouse to pay for his or her care, and must be "spent-down."
Step Three: Begin Spending-Down.
The easiest way to eliminate the spend-down amount is to convert the countable resources into non-countable resources. This conversion can be easily accomplished by any one, or more, of the following:
1. Purchasing a prepaid funeral plan;
2. Paying off an existing mortgage;
3. Making home improvements;
4. Purchasing a new automobile;
5. Purchasing furniture, clothing, and other personal property; and
6. Paying off existing bills.
Step Four: Purchase a Medicaid Compliant Annuity.
On the assumption that the entire spend-down amount was not eliminated by one, or more, of the aforementioned techniques, the remaining spend-down amount can be totally eliminated through the purchase of a Medicaid Compliant Annuity. In a community spouse case, purchasing the Medicaid Compliant Annuity is the final step prior to making the Medicaid application.
Note: The current trend in community spouse planning has been to utilize a short-term Medicaid Compliant annuity - less than 12 months, in order to avoid a potential pay-back to the state. However, it has always been the opinion of Krause Financial Services that this type of planning will lead to increased restrictions in community spouse planning (e.g. the recent NASMD letter). As such, it is not always best to simply "go short."
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 the length should not be so short as to create an unreasonable amount of monthly income. The total monthly income received should be reasonable in light of the annuitant's current and future monthly needs.
1 Alabama, Arizona, Arkansas, Connecticut, Delaware, District of Columbia, Idaho, Indiana, Iowa, Kansas, Kentucky, Maryland, Michigan, Minnesota, Missouri, Montana, Nebraska Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Dakota, Tennessee Texas Utah, Virginia, Washington, West Virginia, and Wisconsin.
2 The term institutionalization includes a hospital stay period for those individual who received skilled nursing home care benefits under the Medicare program.
3 Alaska, California, Colorado, Florida, Georgia, Hawaii, Illinois, Louisiana, Maine, Massachusetts, Mississippi, South Carolina, Vermont, and Wyoming.
Visit us at http://www.medicaidannuity.com/
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Krause Financial Services specializes in helping families qualify for Medicaid benefits through the use of Medicaid Compliant Annuities, and Veterans Aid & Attendance benefits through the use of various life and annuity insurance products.