Annuities may create too much income
The last several columns, I’ve addressed how individuals can maximize their available resources in order to afford needed care as they age. One of the questions I regularly get is whether a person is automatically disqualified from Medicaid if he or her income is too high. The short answer is no.
Medicaid says that you cannot qualify if you earn more than $2,199 per month. However, you still may apply for Medicaid even if you earn income above that amount. In order to apply, you must set up something called a “Qualified Income Trust.” Some states call it a “Miller Trust.” Usually this trust is managed by the well spouse.
The concept for this kind of trust is that it siphons off and holds the applicant’s income. All of the applicant’s income, no matter it’s source, must be deposited into the bank account for the Qualified Income Trust. For example, the applicant’s Social Security, pension payments, and any annuity payments must all be deposited there.
From the account, the trustee must pay the applicant $90 per month as a personal allowance. Then, with a proper court order, the trustee may pay the well spouse up to $2,980 as the community spouse’s interest. Additional expenses needed for the applicant’s care, such as the cost of traditional health insurance, or out-of-pocket expenses for the applicant’s medical needs, may be paid out of this account.
If there are any funds left at the end of the month, the trustee cannot withdraw them. Instead, that “extra” income must remain in the trust’s bank account. Over time, this amount may build up. But, the trustee is not permitted to withdraw this amount. Instead, after the applicant has passed away, Nevada Medicaid may use the funds to pay down (or pay off) any Medicaid lien.
As a practitioner in elder law, one of the biggest areas of concern I have is the over use of annuities to provide for the care of an individual. Done wrong, the asset you just converted to an annuity may cause an individual to have too much income if the applicant needs to apply for government benefits. It may ultimately result in someone converting retirement assets into a stream of income, which will be siphoned off and ultimately be paid to Medicaid.
Annuities certainly have their place, but they are not the cure-all to the problem of affording long term care. A comprehensive look at all the resources available to you and your spouse is key to planning for long term care. Annuities are only one tool. Investing in other assets, such as improvements in your home or a long term care insurance policy, a proper court order to preserve assets and income for the well spouse, are each strategies that should be considered. This type of planning should be done as soon as possible so that you can maximize all your available resources. We should plan for abundant living and the best way to do that is to plan early.
Cassandra Jones is an elder law and family law attorney in Gardnerville. She can be reached at 782-0040.