Private Annuities For Asset Protection In Massachusetts
Annuities are often used in connection with Medicaid planning to protect assets in the event earlier planning was not undertaken.
Our Boston attorneys at Cushing & Dolan, P.C., can help you explore using annuities as part of a comprehensive life plan. Contact us today to learn more during a free consultation.
How To Manage Assets Through Annuities
In the case of a single person, a gift of half of the individual’s assets with an annuity for the balance can protect 50 percent of that person’s assets. The terms of the annuity that are required by Medicaid in order to carry out this technique are not commercially available, so a private annuity must be utilized.
In the case of a married couple, the excess resources over the $101,640 cap can be protected using an annuity. Here, a commercial annuity may be utilized but, depending upon the nature of the excess resources (such as a vacation home or hard-to-value tangible personal property), a private annuity may be utilized.
There is no limit on the amount of assets that can be protected using an annuity technique.
Frequently Asked Questions About Annuities
If you have questions about the role of annuities in your Medicaid planning, our firm can provide answers.
What are the potential risks or drawbacks of using private annuities in Medicaid planning?
One potential drawback is that if the Medicaid annuity is used incorrectly, it does not actually get you under the income and asset limits. You will be receiving monthly payments from the annuity. If they put you over the limits, you may not be eligible for Medicaid. That is why it is so important to set everything up correctly.
Another issue to consider is that the annuity needs to be Medicaid compliant in order to qualify. There are a few different criteria that have to be met. For instance, it has to be irrevocable and make fixed and immediate payments. It has to fit the owner’s life expectancy projection, and it needs to be a non-transferable annuity. It should offer a full return on investment, but if the owner passes away before that has been completed, then the state needs to be named as the beneficiary.
How is the value and payment schedule of a private annuity determined during Medicaid planning?
The value can be different, depending on how much a person needs to reduce the value of their estate to qualify for Medicaid benefits. When creating the scheduled repayment plan, the person’s life expectancy and age have to be considered. It should be set up so that they will receive the full value back before they pass away, but the payments also need to be structured in such a way that they are small enough to keep the person eligible for Medicaid benefits. So the goal is to find a balance between paying the money back quickly enough that they will receive their investment and paying it back slowly enough that they are not disqualified.
Can private annuities be used in Medicaid planning if there are family members with special needs or disabilities involved?
Yes, it is still possible to use annuities with Medicaid planning. That said, there are some important considerations, and the plan has to be set up appropriately. For instance, a person with special needs also needs to pass a means test to qualify for benefits. If they do not, then a special needs trust (SNT) may need to be established to hold certain assets on their behalf, as having the assets in the trust should not affect their eligibility for SSI or Medicaid. A combined strategy of annuities and trusts may be necessary to ensure eligibility for all.
If you have questions about private annuities and how they affect Medicaid eligibility, send us an e-mail or call 888-759-5109. Free initial consultation with an experienced lawyer.