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The Medicaid-Qualified Annuity—A Powerful MassHealth Planning Tool in the Event of a Nursing Home Admission

A Medicaid-qualified annuity is an excellent tool to maximize the amount of money the community spouse (the spouse not in the nursing home) can keep if the spouse in the nursing home must apply for MassHealth benefits to pay the nursing home bill.

 

Here is an example:
Mr. Brown is in a nursing home paying privately approximately $11,500 per month. This payment stream ends when Mr. Brown is approved to receive MassHealth benefits to pay the bill. Approval can occur when Mr. Brown has under $2,000 and Mrs. Brown, the community spouse, has under $123,900, plus the home, one automobile, two irrevocable pre-paid funerals, and two $1,500 burial accounts.

 

If Mrs. Brown has more than $123,600, the assets above this number can be paid to purchase an annuity to convert the excess assets into an income stream to Mrs. Brown. Typically, Mrs. Brown will receive 60 monthly checks starting 30 days after the single premium income annuity (“SPIA”) was paid to the annuity company. Once Mr. Brown begins receiving MassHealth benefits, his income must be paid to the nursing home, and MassHealth makes up the rest of the cost. Mrs. Brown gets to keep all of her income, including the annuity income. The SPIA must be irrevocable. Once Mr. Brown is approved, Mrs. Brown can accumulate more than $123,600. In other words, she does not have to spend all of the income flowing to her. She will have to pay some income taxes, but only on the income portion of the annuity, not the principal portion of the annuity.

 

This tool can be done “last minute,” when a spouse is in or heading to a nursing home.