The Use of a “Medicaid” Annuity to Protect Assets

A number of financial planners and professionals, including lawyers, state that “you’re within the five year look back period; Therefore, you are too late to protect your assets.” Accordingly, you have to spend all your money, on the nursing home, before Medicaid will pay.


Life care planning attorneys have a number of asset protection planning tools. One is a “Medicaid” annuity, which meets the requirements of the Deficit Reduction Act, enacted by then President Bush, in 2005.

A typical scenario, a spouse comes to our office, and states, that her husband is in the nursing home. Her assets consist of a $350,000 residence; savings, checking account, IRA, and CD’s worth about $209,000. Since the wife (community spouse) is living in the community home, the home is protected (You will have to re-title the property). However, the $209,000 assets are an issue. According to the Medicaid regulations, in Maryland, the community spouse is allowed to keep $109,000. The state says the allowance is too prevent hardship and impoverishing the community spouse. The excess resources of $100,000 must be spent down below $2,500.

Some financial planners and other uninformed professionals’ state “Spend it on the nursing home, at about $10,000 per month. Therefore, in approximately, ten months, your spouse will qualify for Medicaid.”

In spite of this, one planning option is the “Medicaid” annuity. This option may, in some cases, be the best asset protection planning strategy, for the community spouse.

The community spouse purchases a “Medicaid” annuity worth in excess of $100,000. Therefore, the $100,000 has vanished. How does this work? The annuity creates an income stream, (non countable) that repays the full amount of the annuity plus interest, over a term of years or the spouse's actuarial life expectancy. Consequently, the $100,000 has vanished and the nursing home spouse becomes eligible for Medicaid. Therefore, saving nursing home costs of $10,000 or more per month, and over the allocated time period, and the $100,000 plus, is returned to the community spouse.

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