Forming a Medicaid Annuity

A Medicaid annuity is a tool for converting assets into an income stream. It is perfect for qualifying someone for Medicaid when that person has a large asset but little income. It is especially useful for someone whose spouse is in a nursing home – they place a large asset into an annuity and receive a monthly income from the annuity. This helps the community spouse get their assets under the $74,820 to $109,560 resource limit. As long as the community spouse’s total income is less than $2,739, the nursing home spouse would qualify for Medicaid.

There is one major issue with annuities – according to Medicaid rules, the principal must be available for Medicaid to recover its costs after the annuity holder’s death. Therefore, the annuity is best when used for someone who has no heirs or only for a small percentage of the community spouse’s assets, just to get under the Medicaid asset limit.

As an added benefit in a few cases, savings on estate taxes as a result of the annuity can match the Medicaid claim. A Medicaid annuity is only valid if it is properly set up and the math works out, so a qualified New York Medicaid attorney and a financial planner need to be consulted.