The Three Medicaid Annuity Questions Attorneys Ask Most

When it comes to Medicaid planning, attorneys are often asked to guide families through rules that can vary from state to state. Medicaid annuities are one of the most misunderstood tools in this process. Below are the three questions attorneys ask the most often, along with the considerations that come up in practice.

1. Is a Medicaid annuity considered a countable asset or income, and what makes it compliant?

Attorneys want to know whether a Medicaid annuity will be counted as part of the applicant’s assets or if it will be treated as income. They also research the requirements for the annuity to meet Medicaid standards in their state. In most states, the annuity must be irrevocable, non-assignable, follow actuarial life expectancy tables, make level payments, and name the state as the remainder beneficiary after certain exempt individuals. Each state may add its own rules on top of these federal guidelines, so attorneys often check both sets of regulations before recommending an annuity.

2. How does a Medicaid annuity work for married clients during a crisis?

This question comes up when one spouse needs care and the other does not. A Medicaid annuity can be used to convert excess resources into income for the spouse who remains at home. Attorneys examine how the timing of the purchase affects the application process, how it impacts the resource allowance for the community spouse, and whether the monthly income is capped. They also consider what will happen if one spouse passes away during the payout term. 

3. Will there be estate recovery and how do beneficiary rules apply?

Before funding a Medicaid annuity, attorneys check whether it could be treated as a gift that triggers a penalty period. They review the rules for naming beneficiaries, especially the requirement that the state be named as primary or secondary in certain situations. Finally, they consider how the remaining payments will be handled if the owner dies, and how recovery rules differ for single clients compared to married clients and for qualified versus non-qualified funds.

How AshBer can help

While the core principles for Medicaid annuities are set at the federal level, each state adds its own interpretation. We can help attorneys by keeping up to speed on these three questions and more. Understanding the often changing answers allows us to help attorneys guide clients confidently through the Medicaid application process without costly mistakes.

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