Medicaid Compliant Annuities
We have Ohio Medicaid compliant annuities that are irrevocable, non-assignable, non-transferable, and actuarially sound, with terms from as short as 2 months to as long as 20 plus years. Contact Gateway Advisors for an Ohio Medicaid qualified annuity by calling 440-709-6563 for more information. We will go to a client’s home or business and complete all required annuity and asset transfer paperwork and follow-up until the funds transfer and the annuity is delivered to the client.
You don’t have to exhaust your life savings and assets to qualify for Medicaid!
Ohio Medicaid definition
Medicaid is a federal governmental program, administered by the State of Ohio that pays for the bulk of long-term care expenses.
Medicaid can be thought of as the “nursing home insurance plan for middle class Americans.”
Ohio Medicaid rules:
Since Medicaid is a government program there are strict requirements that must be met.
U.S. citizen or qualified alien
At least age 65 or disabled
Residing in a nursing home in Ohio
Limited countable assets
Medicaid eligibility based on income
Income from sources such as pension, Social Security, and annuities
Income must be less than nursing home monthly private pay rate
The average Ohio nursing home private pay rate is $6,327 per month (higher in major metro areas)
Individual – Medicaid eligibility based on assets
An Ohio institutionalized individual can generally keep $1,500
A community spouse can keep $119,220
Other assets you can keep?
Personal property and household items
Irrevocable funeral trust or prepaid burial contracts
Disqualification from Medicaid benefits – Medicaid benefits denied
This is often due to having too many assets or too much income
How to qualify for Medicaid benefits by eliminating excess countable assets
This is often done by “spending-down” your assets by:
Paying out of pocket for care at a nursing home
Paying off your home mortgage, credit card balances and other bills
Improving or purchasing non-countable resources such as those listed above.
Converting excess countable investment assets into a qualified Ohio Medicaid compliant immediate annuity.
Finding an Ohio Medicaid qualified annuity
Only a hand full insurance companies offer immediate annuities that meet the requirements outlined in the Deficit Reduction Act of 2005 and Ohio Administration Code 5160:1-3-05.3
A qualified compliant immediate Medicaid annuity will have the following attributes:
Provides equal payments
Names the State of Ohio as beneficiary
When to use an Ohio Medicaid compliant immediate annuity
Currently residing in a Medicaid-approved nursing home
Expected to reside at the nursing home indefinitely
Does not have remaining Medicare benefits to cover nursing home costs
Currently is self-paying the nursing home
Has excess countable assets to spend down
Married couple – hypothetical example
In this hypothetical example we will illustrate a scenario involving one spouse living in a nursing home and the other remaining in the community and living at home.
Example: John & Pauline
John entered a nursing home on September 1, 2015 and is 83 years old
Pauline, the community spouse, lives at home and is 82 years old
$2,500 is John’s monthly income
$1,100 is Pauline’s monthly income
They have a home, furniture and personal property, one car which are non-countable assets
$410,000 in non-IRA bank accounts
$8,000 per month is the cost of John’s nursing home care
John & Pauline’s strategy
Qualify John for Medicaid benefits to pay the $8000 per month nursing home bill as quickly as possible.
Insure Pauline has adequate income to maintain her lifestyle and remain in her home.
(Step 1) Determine amount of spend-down
Remember, Pauline is allowed to keep the following:
Her personal property
Of the $410,000 cash assets she can keep $119,220
John is allowed to keep his personal property and $2,000 of the $410,000 cash assets
John and Pauline’s total spend-down amount is calculated to be $288,780
(Step 2) Immediately eliminate John and Pauline’s spend-down amount of $288,780
Purchase a $10,000 funeral expense trust for Pauline
Purchase a $10,000 funeral expense trust for John
Purchasing a $268,780 Ohio Medicaid compliant annuity for Pauline
Annuity Premium $268,780
Annuity term equal to Medicaid life expectancy tables = 101 months
Monthly annuity payout = $2,729.42 for 101 months
Total paid to Pauline – $275,671.42
(Step 3) Apply for Medicaid benefits
Pauline’s Maximum Monthly Needs Allowance: $2,981
Pauline’s total income: $3,829.42
John’s total income: $2,500
John’s Maximum Monthly Needs Allowance $35
John’s Medicaid co-pay: $2,465
Economic benefits of this strategy
$8,000 per month is what John and Pauline expected to pay the nursing home
$2,465 per month is John’s out-of-pocket Medicaid co-pay
$5,535 is what John and Pauline will save on a monthly basis.
Advantages of this plan for John and Pauline
John was immediately eligible for Medicaid benefits to pay nursing home costs
Pauline will have the income she needs to continue living in her house
Potential disadvantages of this plan for John and Pauline
The State Medicaid Department would be the first in line beneficiary if both Pauline and John would pass away. The Medicaid Department would be entitled to repayment of nursing home Medicaid benefits ahead of any other beneficiaries. After repayment of Medicaid benefits beneficiaries would be entitled to the remaining balance.
Single person – Hypothetical example
Helen is an 85 year old widow residing in a nursing home
Helen has a good chance to live to age 100
$205,000 is her spend-down amount
$1,000 is her current monthly income
$8,000 per month is the nursing home private pay rate
$6,000 is the Medicaid Divestment Penalty
What happens if Helen does nothing to solve this problem?
She will draw down her entire life savings after just 29 months
$205,000 / ($8,000 – $1,000) = 29 months
(Strategy 1) Gifting / Medicaid compliant annuity plan
Consider using this strategy if the nursing home resident has a good life expectancy. Do not use if the resident has a terminal illness with a predictable amount of time to live.
The Goals of a Gifting / Medicaid compliant annuities
Helen makes an immediate wealth transfer gift to her heirs
Helen will qualify for Medicaid benefits at the end of the penalty period associated with the gift
(Step 1) Calculate the length of the plan
(Income Shortfall) + (Divestment Penalty Divisor) = Cash Burn Rate
$7,000 + $7,694 = $14,694 Cash Burn Rate
(Spend Down Amt.) / (Cash Burn Rate) = Term of Plan
$205,000/$14,694 = 13.95 Term of Plan
(Step 2) Calculate the amount to gift
(Term of Plan) X (Divisor) = Gift Amount
14 months X $7,694 = $107,716 Gift Amount
(Step 3) Calcualte the Medicaid compliant annuity premium
(Spend Down Amount) – (Gift Amount) = Annuity Premium Amount
$205,000 – $107,716 = $97,284
Annutiy single premium = $97,284
Annuity term = 14 months
Annuity monthly payout = $6,974.87
Annuity total payout = $97,648.18
(Step 4) Transfer gift amount to family member or friend
(Step 5) Purchase a qualified Ohio Medicaid compliant annuity from Gateway Advisors by calling 440-709-6563
(Step 6) Apply for Medicaid
***Special Note*** It is recommended that all of the above steps should be coordinated by an Ohio Elder Law attorney specializing in Medicaid planning. Call Gateway Advisors at 440-709-6563 for recommendations of Ohio elder law attorneys that are well versed in Medicaid planning located near you.
(Strategy 1) Advantages
This plan allowed Helen’s heirs to receive an immediate gift of $107,716
Helen’s heirs can cover her total monthly nursing home shortfall, with money left over for clothing, manicures, massages, etc.
Helen qualified for Medicaid in month 15
In the 15th month, her Medicaid co-pay is $950 (Social Security $1,000 less Privite Nursing Allowance of $50)
(Strategy 1) Disadvantages
If Helen does not live until the 15th month she will not have gained any economic benefit
For more information on Ohio Medicaid Compliant Annuities or how to find an Elder Law attorney near you that specializes in Medicaid planning contact Gateway Advisors at 440-709-6563