Immediate annuities is a Medicaid planning tool for spouses of nursing home residents.

A single premium immediate annuity (SPIA) is a contract with an insurance company where the non-nursing home spouse pays a sum of money to an insurance company.  Consequently, the insurance company sends a monthly check to the non-nursing home spouse for a certain time period or for the rest of their life. In Maryland, and some states, the purchase of a SPIA is not considered to be a transfer (gift) for purposes of Medicaid eligibility, because it is an income stream. Therefore, it transfers countable assets into a non-countable assets.

In order for the annuity purchase not to be considered a transfer, it must meet three basic requirements: (1) It must be irrevocable (2) You must receive at least the amount that you paid into the annuity during your actuarial life expectancy or time period, less than your actuarial life expectancy. (3) Under the DRA, the State of Maryland must be named the remainder beneficiary up to the amount of Medicaid paid on the annuitant's behalf, prior to a contingent beneficiary (i.e. children).

For example, the community spouse resides in Maryland, and spouse is in a nursing home. To qualify for Medicaid the maximum resource allowance is $109,560 (in 2011). However, the community spouse has $309,560 in countable assets, $200,000 overscale. The community spouse  can purchase a $200,000 annuity, and receive a monthly income. Consequently, nursing home spouse is immediately eligible for Medicaid.

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