Purchasing a Medicaid Compliant Annuity Pre-Snapshot vs. Post Snapshot
When planning for a married couple in a state that has a minimum and maximum Community Spouse Resource Allowance (CSRA), the timing of “spending down” or purchasing a Medicaid Compliant Annuity (MCA) is crucial. A few weeks ago, we posted a blog explaining how State Medicaid offices determine the amount of assets the spouse remaining in the community can keep. Some states have a maximum CSRA while other states have a minimum and maximum amount, not to exceed the maximum.
If you reside in a state that has both a minimum and maximum CSRA amount, the timing of when your clients spend-down assets is very important. The CSRA is going to be determined by looking at the couple’s total assets as of the “snap-shot date” or the first continuous period of institutionalization. The couple’s assets as of the snap-shot date will be totaled and then divided in half (not to exceed the maximum of $128,640) in order to determine how may assets the community spouse can keep. Therefore, the greater the amount of assets in the couple’s name as of the snap-shot date, the greater the amount of assets the community spouse will be able to retain – i.e. the CSRA will be greater.
Let’s look at an example of a couple who has $250,000 as of the snap-shot date. The CSRA will be ½ of the total assets, or $125,000. The other $125,000 will need to be spent-down before the institutionalized spouse may qualify for Medicaid. Once the snap-shot date and CSRA are set, that date and the number does not adjust. Therefore, the community spouse may keep $125,000 in resources, purchase a MCA with the other $125,000, and immediately qualify the institutionalized spouse for Medicaid. Here’s how the Math works out:
Total Assets as of Snap-shot: $250,000 divided by 2 (not to exceed the maximum of $128,640) = $125,000
CSRA = $125,000
Spend-Down amount is determined by taking the total assets of $250,000 and subtracting $125,000 for the CSRA leaving $125,000 that needs to be spent-down
However, let’s consider an example where the community spouse purchases a MCA prior to the snap-shot date for $125,000. Now, the couple’s total countable resources as of the snap-shot date is only $125,000. When the total countable resources of $125,000 are divided in half, the CSRA will be $75,000 and the couple will still have to spend-down another $50,000 before the institutionalized spouse will qualify for Medicaid.
Total Assets = $250,000 less MCA purchase of $125,000 = $125,000
Total Assets as of Snap-shot: $125,000 divided by 2 (not to exceed the maximum of $128,640) = $62,500
CSRA = $62,500
Spend-Down amount is determined by taking the total assets of $125,000 and subtracting $62,500 for the CSRA leaving $62,500 that needs to be spent-down
In light of the examples, above,you can see that by first establishing the snap-shot date and waiting to purchase the MCA, the community spouse may retain the maximum amount of resources ($125,000 versus $62,500) as his/her CSRA.If the MCA or spend-down is done prior to the snap-shot date, the community spouse will not be able to maximize the full CSRA and will likely have a second spend-down required after the snap-shot date is established.