ANNUITIES
The Medicaid market
presents you and
your clients with the
opportunity for a better
way to deal with an
already stressful time.
Annuities from page 18
This arrangement makes Susan the owner and annuitant, based
on her life expectancy. However, in arranging the Medicaid-
compliant annuity, the primary beneficiary listed will be the state,
as any remaining money left in the annuity after Susan’s death
would be recovered to help pay for the amount Medicaid has
spent on Michael’s medical care to date. Any amount left after
paying the state would go to Susan’s beneficiaries. 2 Consider timing and delivery
Meeting compliancy requirements
This type of transaction is regulated in part by the Deficit
Reduction Act of 2005 (DRA). The DRA was passed to address
transfers of assets to qualify for Medicaid. Under the DRA,
Medicaid-compliant annuities were established to help ensure
either spouse wouldn’t be impoverished by a serious medical
condition.
To comply with DRA regulations, Medicaid-compliant annuities
must meet certain requirements. These requirements include
that the annuity be irrevocable and actuarially sound, and that
payments from the annuity begin immediately after purchase.
Also, a spouse or child can be named as the remainder beneficiary
to collect on any leftover proceeds after the amount of Medicaid
support is deducted. It’s important to discuss the annuity purchase with an elder-
care attorney who has specific knowledge to the needs facing
seniors and is well-versed in your state’s laws. In addition,
your elder-care attorney should be familiar with estate
planning, preservation of assets, Medicaid and long-term
care solutions.
Tips for counseling clients
To help make sure you’re recommending and implementing a
sound strategy for your clients, consider these tips:
1 Partner with a highly rated company
Spend time reviewing carriers to ensure you’re putting trust
in the hands of an upstanding organization. This includes
reviewing financial ratings and learning more about the
company’s approach to customer service.
20
Perspectives
Q4 2019
One of the key factors for this type of arrangement is
timeliness. The faster the annuity contract can be shared
with the Medicaid reviewers to show that assets have been
repositioned into a Medicaid-compliant immediate annuity,
the faster the spouse can qualify for the care he or she needs.
3 Work in conjunction with an elder-care attorney
4 Know the features
Medicaid-compliant annuities are irrevocable once issued,
nonassignable and nontransferable; must be actuarially sound;
and provide payments in equal amounts. These are important
aspects to bring up with clients to make sure they understand
the specifics of the annuity ahead of the purchase.
Since the need for long-term care assistance will be increasing
in the years to come, start having conversations with clients about
options to pay for these impending future expenses. The Medicaid
market presents you and your clients with the opportunity for a
better way to deal with an already stressful time. An annuity can
be the spend-down option that preserves the integrity of your
client’s way of life and allows an ill spouse to receive important
care, which helps to ensure that both clients are supported.