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Does Medicaid consider an annuity to be a countable resource which individuals or married couples must spend down prior to qualifying for Long Term Care Medicaid when they enter a nursing home?

Deferred annuities, also known as taxdeferred annuities, where one invests money and funds are left in the annuity to grow, and the annuity owner, at any time, can cancel the annuity and withdraw the money, are countable resources which must be spent prior to Medicaid qualification.

Income from an immediate annuity is considered "income" for Medicaid.

Some couples, however, have attempted to use a strategy to convert excess countable resources into an income stream for the spouse who is not in the nursing home.

For purposes of Medicaid's asset test, the countable resources of both spouse are counted for Medicaid eligibility, even when only one spouse is in the nursing home and applying for Long Term Care Medicaid. For purposes of the income test, the nonapplicant spouse's income is not counted. Care must be met when attempting to utilize one of these "Medicaid Compliant" annuities so that all of the rules will be met, including naming the state as beneficiary for the total amount of Medicaid assistance paid on behalf of the institutionalized spouse.

Failure to follow the rules will render the purchase of the annuity a transfer for less than fair market value, potentially rendering the institutionalized spouse ineligible for Medicaid for five years or more.

Note also that since Medicaid is a federal program administered by each state, each state's rules may differ.

The key here, as in all Medicaid eligibility planning, is to plan ahead, while you are healthy.

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Paul Rabalais
Estate Planning Attorney
www.RabalaisEstatePlanning.com
Phone: (225) 3292450