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  • Writer's pictureAmber Hinds

Name on The Check Beneficiary Example

Thomas and Barbara Smith are married. Barbara is the owner of an IRA valued at $100,000 and she is the spouse that is in need of care. Thomas is the community spouse. If we use name on the check rule for Barbara’s IRA based on her Medicaid life expectancy of 7 years / 84 months, Thomas would receive monthly annuity payments of $1,250.

With Barbara being the IRA owner, she would also be owner of the IRA Medicaid Compliant Annuity (“MCA”) and Thomas would be the payee of the MCA. The MCA parties would be as follows:

Annuity Owner: Barbara

Annuitant (measuring life): Barbara

Payee: Thomas

Primary Death Beneficiary: Thomas, the community spouse

Contingent Death Beneficiary: State Medicaid Agency to the extent Medicaid benefits were paid on behalf of Barbara

Tertiary: Thomas and Barbara’s children

With Barbara being the annuity owner and the measuring life of the annuity contract, if Barbara passes away, the beneficiary designation will be triggered. With Thomas being the primary beneficiary, Thomas will have the right to continue the monthly payments as scheduled or elect a lump-sum of cash to rollover into his own IRA. At that point, if Thomas chooses to continue the payments, he may name whomever he wishes as beneficiary.

Alternatively, if Thomas as the annuity payee passes away before Barbara, the payments will revert back to Barbara. With Barbara receiving Medicaid benefits, if the MCA payments revert back to Barbara, her Medicaid co-pay will increase based on the MCA payments now going to her. Barbara will continue to receive the monthly annuity payments as scheduled until she passes. At the time of Barbara’s death, the beneficiary designation will be triggered.

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