Medicaid crisis planning is a crucial step in preparing for the future and taming the unexpected. And as with the case of Marie, a client I was happy to assist, Medicaid crisis planning helped turn an unexpected situation into the best possible outcome for her and her husband.
$300,500.00 was most of Marie’s life savings. When she remarried while in her late 60s, it did not matter that her new husband had scant funds. Marie was happily working, and her new husband, Charlie, could help with the bills using his significant pension. No more than 10 years after their marriage, Charlie was diagnosed with Alzheimer’s Disease. As the disease progressed, Marie could no longer care for Charlie. He moved to the memory care facility at a cost of $6,500.00 per month. Marie not only felt guilty but also selfish. She did not want to spend her modest retirement savings on Charlie’s care. What if she needed care?
When I first met with Marie, she shamefully shared her situation like a confession. Marie was not being selfish; she was practical. I told her no one wanted her to go broke paying for Charlie’s care. Not even the federal government. She gave me a puzzled look, and I explained we can protect her savings, even if Charlie is receiving Medicaid to pay for his long-term care. We just needed the right approach to Medicaid crisis planning.
If a Medicaid applicant is married, eligibility for the program is based on the assets of the couple, not just the applicant. However, the 2005 Deficit Reduction Act (DRA) clarified Medicaid spousal impoverishment protections enabling the community spouse (Marie) to preserve her assets while establishing Medicaid eligibility for the institutionalized spouse (Charlie). A Medicaid compliant annuity is one form of protection.
Using a Medicaid annuity can be tricky. The product must meet federal requirements, and the amount and timing of its placement must be exact. Poor planning can result in ineligibility for Medicaid for a long time. Assistance from an experienced elder law attorney is essential.
The upside: the purchaser of the annuity (Marie) can fund it with savings that exceed the Medicaid eligibility resource cap. By purchasing the annuity, Charlie’s eligibility for Medicaid is accelerated, and Marie gets her money back in substantial monthly payments. Once the annuity payment hits Marie’s bank account, it is hers free and clear. She can invest it, put it toward a down payment on a condo, or use it to up her ante in a poker game. It’s hers.
When I met with Marie to complete the annuity paperwork, she was nervous. She had never written such a large check – $300,500.00 – but she wrote it gladly. She knew funding the annuity was in the best interest of her and Charlie.