In the world of estate planning, planning ahead is the name of the game because you just never know when you will need your estate plan to start working for you. Of course, many of us are procrastinators and life has a way of throwing us unexpected curves. Trying to help a loved one who needs sudden access to Medicaid services, but has not planned ahead, can be an extremely stressful scenario. But fear not—if you find yourself in this predicament there is still hope, thanks to the immediate annuity.
An immediate annuity is an insurance contract in which the insured party gives a lump sum of money to the insurer in exchange for a guaranteed series of repayments, usually in monthly installments. This can be a very useful planning tool in that it can help those with assets greater than the current MassHealth asset limits avoid having to spend their life savings on medical care, leaving nothing for their family or future needs. Currently, the MassHealth asset limits are $2,000 for the applicant and $109,560 for a spouse living in the community.
For example, suppose a married couple, both 75, have investments worth $250,000. The husband needs to enter a nursing home with no advanced planning in place. The total amount allowed to be kept by the couple under MassHealth is $111,560 ($2,000 for the applicant and $109,560 for the spouse); the rest will have to be spent on medical care before he will qualify. However, the couple can purchase an annuity for the remaining assets ($138,440) to be paid within four years, in accordance with the current life expectancy of a 75 year old. This will give the applicant’s spouse a monthly income payment of $2,884.17 which will be protected from medical expenses.
In order to be helpful for Medicaid (MassHealth) planning purposes an annuity must be repaid in equal payments, be irrevocable and non-assignable, have no deferral or balloon payments, and be actuarially sounds (meaning it must be scheduled to be repaid within the life expectancy of the insured party).
There are other restrictions on the use of annuities in planning for Medicaid that must be assessed on a case by case basis. To find out whether an annuity would be a helpful planning tool for you or a loved one you should contact a Massachusetts estate planning attorney.