<![CDATA[Medicaid Annuity Solutions - Blog]]>Tue, 28 Apr 2026 07:59:06 -0700Weebly<![CDATA[ABLE Act, An Overview for People With Disabilities]]>Thu, 28 May 2015 17:37:22 GMThttp://www.mymedicaidannuity.com/blog/able-act-an-overview-for-people-with-disabilitiesThe Achieving a Better Life Experience (ABLE) Act was signed into law in late 2014.

The ABLE Act would amend Section 529 of the Internal Revenue Service Code of 1986 to create tax-free savings accounts for individuals with disabilities. The bill aims to ease financial strains faced by individuals with disabilities by making tax-free savings accounts available to cover qualified expenses such as education, housing, and transportation. The bill would supplement, but not supplant, benefits provided through private insurances, the Medicaid program, the supplemental security income program, the beneficiary’s employment, and other sources.

An ABLE account could fund a variety of essential expenses for individuals, including medical and dental care, education, community based supports, employment training, assistive technology, housing, and transportation. The ABLE Act provides individuals with disabilities the same types of flexible savings tools that all other Americans have through college savings accounts, health savings accounts, and individual retirement accounts. The legislation also contains Medicaid fraud protection against abuse and a Medicaid pay-back provision when the beneficiary passes away. It will eliminate barriers to work and saving by preventing dollars saved through ABLE accounts from counting against an individual’s eligibility for any federal benefits program.

ABLE Accounts: 10 Things You Must Know:

1. What is an ABLE account?

ABLE Accounts, which are tax-advantaged savings accounts for individuals with disabilities and their families, will be created as a result of the passage of the ABLE Act of 2014. Income earned by the accounts would not be taxed. Contributions to the account made by any person (the account beneficiary, family and friends) would not be tax deductible.

2. Why the need for ABLE accounts?

Millions of individuals with disabilities and their families depend on a wide variety of public benefits for income, health care and food and housing assistance. Eligibility for these public benefits (SSI, SNAP, Medicaid) require meeting a means or resource test that limits eligibility to individuals to report more than $2,000 in cash savings, retirement funds and other items of significant value. To remain eligible for these public benefits, an individual must remain poor. For the first time in public policy, the ABLE Act recognizes the extra and significant costs of living with a disability. These include costs, related to raising a child with significant disabilities or a working age adult with disabilities, for accessible housing and transportation, personal assistance services, assistive technology and health care not covered by insurance, Medicaid or Medicare. 

For the first time, eligible individuals and families will be allowed to establish ABLE savings accounts that will not affect their eligibility for SSI, Medicaid and other public benefits. The legislation explains further that an ABLE account will, with private savings, "secure funding for disability-related expenses on behalf of designated beneficiaries with disabilities that will supplement, but not supplant, benefits provided through private insurance, Medicaid, SSI, the beneficiary's employment and other sources."

3. Am I eligible for an ABLE account?

Passage of legislation is a result of a series of compromises. The final version of the ABLE Act limits eligibility to individuals with significant disabilities with an age of onset of disability before turning 26 years of age. If you meet this criteria and are also receiving benefits already under SSI and/or SSDI, you are automatically eligible to establish an ABLE account. If you are not a recipient of SSI and/or SSDI, but still meet the age of onset disability requirement, you would still be eligible to open an ABLE account if you meet SSI criteria regarding significant functional limitations. The regulations to be written in 2015 by the Treasury Department will have to explain further the standard of proof and required medical documentation. You need not be under the age of 26 to be eligible for an ABLE account. You could be over the age of 26, but must have the documentation of disability that indicates age of onset before the age of 26.

4. Are there limits to how much money can be put in an ABLE account?

The total annual contributions by all participating individuals, including family and friends, is $14,000. The amount will be adjusted annually for inflation. Under current tax law, $14,000 is the maximum amount that individuals can make as a gift to someone else and not pay taxes (gift tax exclusion). The total limit over time that could be made to an ABLE account will be subject to the individual state and their limit for education-related 529 savings accounts. Many states have set this limit at more than $300,000 per plan. However, for individuals with disabilities who are recipients of SSI and Medicaid, the ABLE Act sets some further limitations. The first $100,000 in ABLE accounts would be exempted from the SSI $2,000 individual resource limit. If and when an ABLE account exceeds $100,000, the beneficiary would be suspended from eligibility for SSI benefits and no longer receive that monthly income. However, the beneficiary would continue to be eligible for Medicaid. States would be able to recoup some expenses through Medicaid upon the death of the beneficiary.

5. Which expenses are allowed by ABLE accounts?

A "qualified disability expense" means any expense related to the designated beneficiary as a result of living a life with disabilities. These include education, housing, transportation, employment training and support, assistive technology, personal support services, health care expenses, financial management and administrative services and other expenses which will be further described in regulations to be developed in 2015 by the Treasury Department.

6. Where do I go to open an ABLE account?

Each state is responsible for establishing and operating an ABLE program. If a state should choose not to establish its own program, the state may choose to contract with another state to still offer its eligible individuals with significant disabilities the opportunity to open an ABLE account.

After President Obama signs the ABLE Act, the Secretary of the Department of Treasury will begin to develop regulations that will guide the states in terms of a) the information required to be presented to open an ABLE account; b) the documentation needed to meet the requirements of ABLE account eligibility for a person with a disability; and c) the definition details of "qualified disability expenses" and the documentation that will be needed for tax reporting. 

No accounts can be established until the regulations are finalized following a public comment period on proposed rules for program implementation. States will begin to accept applications to establish ABLE accounts before the end of 2015.

7. Can I have more than one ABLE account?

No. The ABLE Act limits the opportunity to one ABLE account per eligible individual. 

8. Will states offer options to invest the savings contributed to an ABLE account?

Like state 529 college savings plans, states are likely to offer qualified individuals and families multiple options to establish ABLE accounts with varied investment strategies. Each individual and family will need to project possible future needs and costs over time, and to assess their risk tolerance for possible future investment strategies to grow their savings. Account contributors or designated beneficiaries are limited, by the ABLE Act, to change the way their money is invested in the account up to two times per year.

9. How many eligible individuals and families might benefit from establishing an ABLE account?

There are 58 million individuals with disabilities in the United States. To meet the definition of significant disability required by the legislation to be eligible to establish an ABLE account, the conservative number would be approximately 10 percent of the larger group, or 5.8 million individuals and families. Further analysis is needed to understand more fully the size of this market and more about their needs for new savings and investment products.

10.How is an ABLE account different than a special needs or pooled trust?

An ABLE Account will provide more choice and control for the beneficiary and family. Cost of establishing an account will be considerably less than either a Special Needs Trust (SNT) or Pooled Income Trust. With an ABLE account, account owners will have the ability to control their funds and, if circumstances change, still have other options available to them. Determining which option is the most appropriate will depend upon individual circumstances. For many families, the ABLE account will be a significant and viable option in addition to, rather than instead of, a Trust program.

Please also see our related post - 529A Savings Plans May Help People With Disabilities 

Thank You]]><![CDATA[529A Savings Plans May Help People With Disabilities]]>Thu, 28 May 2015 16:56:32 GMThttp://www.mymedicaidannuity.com/blog/529a-savings-plans-may-help-people-with-disabilitiesIn late 2014, the U.S. Congress passed the Achieving a Better Life Experience Act, which created a 529A account to provide tax advantaged benefits for disabled individuals. It is a significant change to the financial planning landscape for special needs beneficiaries, with the potential for helping many families with disabled members.

The 529A is modeled after the Section 529 College Savings Plan, which is widely used for college planning. The 529A account is meant to allow tax advantaged accumulations and distributions for a wide range of expenses for the disabled beneficiary. Here are some specifics about the plans and how they differ from traditional 529s:

  • The 529A account uses the Social Security definition of disability. In addition it can benefit only people who have been diagnosed with a qualifying disability before age 26.
  • Like the 529 college plans, the 529A will be set up on the state level. Presumably, the same state agencies that oversee the 529 college plans will be responsible for the 529A, although that may differ from state to state.
  • There can be only one 529A account per beneficiary, normally in his or her state of residence. That is different from the 529 college plans, for which there is no limitation on which state plan is used, and where the distributions are made.
  • Spending for a beneficiary can occur only in his or her state of residence. This will allow simplified compliance verification for federal and state agencies.
  • Contributions in the 529A are with after tax money and are limited to $14,000 a year (in 2015) for each beneficiary from all sources. Individual states may choose to provide additional tax benefits.
  • Investment growth in the 529A is tax free.
  • Distributions are tax free so long as they are used for qualified expenses. Otherwise, earnings on distributions are taxed at ordinary income rates with a 10% penalty added. Qualified expenses include housing, transportation, health and wellness, and education.
  • Having a 529A does not disqualify the disabled individual from federal and state aid, such as Supplemental Security Income or Medicaid, so long as the amount held in the 529A does not exceed $100,000. Should the 529A account balance exceed $100,000, Supplemental Security Income would be suspended, but not terminated. Once the balance falls below $100,000, benefits would be resumed.
  • The limitations on contributions and on balance levels suggest that the 529A could be used as a hybrid between an investment account and a checking account.                                                                                                                      
Advantages 
  • The 529A comes with built-in benefits such as low costs (hopefully), tax advantages and the ability to have up to $100,000 in assets without jeopardizing access to public support programs.

  • The new plan should be attractive to many middle-class families. Similar to the intent of the 529 plan for college bound students, the 529A allows families to set aside money for their disabled loved one, and use it as needed, while limiting the impact of unforeseen expenses on their lifestyle.

Drawback 
  • The 529A has restrictions for annual contributions and maximum balance that may make an account delicate to manage. It is not a vehicle for disabled people to accumulate more than $100,000. In fact due to the relatively low balance limit, the vagaries of market fluctuations that it may be subjected to and the inevitable withdrawals that will occur, many people will want, if they can afford it, to supplement a 529A with a Special Needs Trust.

The 529A is not a perfect vehicle. However, it is a great new tool to help disabled people. It will allow more families to plan support for their disabled family members with an easy-to-use framework that should be relatively low cost and may provide additional funding in the form of tax free earnings. In addition, 529A accounts supplement rather than replace Special Needs Trusts by filling a gap for the period before Special Needs Trusts are funded.

Please also see our post ABLE Act an Overview for People With Disabilities

]]><![CDATA[Wealth Transfer Techinique for a single Medicaid applicant]]>Wed, 27 May 2015 12:05:38 GMThttp://www.mymedicaidannuity.com/blog/wealth-transfer-techinique-for-a-single-medicaid-applicantWhen someone enters a nursing home and applies for Medicaid benefits, a single individual generally does not have as many wealth transfer opportunities as a married couple might.  A married couple can typically save 100% of their assets [using a Medicaid Compliant Annuity], while a single person may not.

One type of technique is coupling a “gift” with a short-term Medicaid Compliant Annuity.

Today we’ll talk about another technique which can offer much greater wealth transfer if the institutionalized individual has a diminished longevity [expected to pass in less than 24 months].

Example:
Jill is 84 years of age and is entering a nursing home in Pennsylvania. She has countable resources of $170,000 with an income of $1,200. She is allowed to keep $8,000 of her resources [$2,000 + $6,000 disregard due to income]. This gives her a spend-down amount of $162,000 . The nursing home has a private pay rate of $9,915/month [and a Medicaid rate of $5,931].

Jill is terminally ill and is expected to pass within 24 months. The goal is to get her qualified for Medicaid immediately which will reduce her monthly pay rate and create the highest wealth transfer possible.

Purchasing a Medicaid Compliant Annuity will eliminate Jill’s spend-down amount which will make her eligible for Medicaid benefits immediately.

With her income of $1,200 this gave her a shortfall of $4,731 for her monthly nursing home payment [$1,200 subtracted from Medicaid pay rate of $5,931/mo].

Annuity details:
Jill’s life expectancy is 7.41 years or 88 months. [according to the Social Security Life Table] therefore, the annuity is purchased for 88 months [annuity cannot exceed life expectancy].

The annuity investment of $162,000 gives Jill a monthly payout of $1,908.96 [total payout is $167,988.49].

Since Jill is now qualified for Medicaid, she pays the Medicaid rate of $5,931/mo, with her original income of $1,200 plus her annuity income of $1,908.96, her total income is $3,108.96, if you subtract her personal needs allowance of $45 she has a co-pay of $3,063.96

Jill passes away in 14 months [the state of PA. is primary beneficiary of her annuity] so they will be reimbursed for the amount of Medicaid benefits Jill received. The nursing homes Medicaid rate was $5,931, if you subtract Jill’s co-pay of $3,063.96, Jill’s Medicaid benefits were $2,867.04 per month or a total of $40,138.56 [Multiply $2,867.04 x 14 months]. This is the amount that Medicaid will recoup from the annuity balance.

The balance of the annuity at the end of the time of Jill’s death was $141,263.05. [14 payments of $1,908.96 = $26,725.44, subtracted from the total expected payout of $167,988.49 = $141,263.05]

The balance that will be transferred to her beneficiary will be $101,124.49. [$40,138.56 owed to Medicaid subtracted from the annuity balance of $141,263.05].

Benefits?
  • Jill was immediately qualified for Medicaid benefits after purchasing the annuity.                                                              
  • Jill saved $3,984/mo paying the Medicaid rate as opposed to the private pay rate.                                                            
  • With no planning at all, Jill would have paid $138,810 to the nursing home which would have made her wealth transfer to her beneficiary only $39,919. [$9,915 – Jill’s income of $1,200 = $8,715/mo for private pay x 14 months = $122,010 subtracted from Jill’s spend down amount of $162,000 = $39,990],

Summation:
  • Jill’s beneficiaries received $101,124.49                                                                                                                     
  • $61,113.49 more than if she had not planned at all.


if you have questions regarding Medicaid annuities or planning techniques give us a call 844.207.1277 or Email: lorrah@mymedicaidplus.com 

]]><![CDATA[How to use an Irrevocable Funeral Expense Trust to Help Qualify for Medicaid]]>Thu, 21 May 2015 16:10:23 GMThttp://www.mymedicaidannuity.com/blog/how-to-use-a-funeral-expense-trust-to-qualify-for-medicaidAn Irrevocable Funeral Expense Trust [IFET] is a key method of securing Medicaid financial qualification because it is not considered a countable resource, therefore, you can use an IFET to turn excess resources into non-countable exempt assets. When in "crisis" planning, the funeral trust is generally purchased after the "snapshot" date of the resource assessment but before the effective date for which the Medicaid benefits are requested. When pre-planning, it can be purchased at any time. You're permitted to purchase 1 [one] for each spouse.

Revocable V. Irrevocable
The difference is actually quite simple, a revocable funeral trust can be dissolved at any time by the person who originally created it and the funds will be accessible, while an irrevocable funeral trust cannot be dissolved, the funds cannot be accessed until the terms of the trust have been met. 

For that reason, an irrevocable funeral trust get s much more favorable treatment from Medicaid. Funds set aside for burial that are revocable and accessible have a maximum limit of $1,500 while funds in an Irrevocable Funeral Expense Trust have a maximum limit in most states of $15,000 [more details of state limits will be covered below]. The difference allows you to shelter much more money, qualify quicker and add peace of mind to your loved ones.
 
Example: Joe enters a nursing home in New Jersey, he and his wife Anne have excess resources of $26,000. If they each purchase an Irrevocable Funeral Expense Trust for $13,000, Joe will qualify financially for Medicaid benefits and there loved ones will have peace of mind. 

What is an Irrevocable Funeral Expense Trust  [IFET]
The IFET that we offer is a blend between a guaranteed issue life insurance policy and an irrevocable trust. The trust is issued and controlled by an insurance company and there are no trust agreements to draft or fees of any kind.                               

Owners of an Irrevocable Funeral Expense Trust benefit from all of the following: 
  • Immediately shield assets from Medicaid and nursing homes
  • Peace of mind knowing funds are guaranteed to be there when needed most
  • Benefits are distributed immediately and tax free
  • Excess funds are distributed to the individuals estate
  • Funds can be used to pay for travel expenses, food & lodging for family members to attend a funeral
  • Assets cannot be confiscated by any nursing home, creditors or lawsuits
  • Funds can allow a portion to be used as a gift for a church or synagogue where the funeral is held 
  • Asset Protection
  • Exempt from Medicaid "spend down" requirements
  • Funds are insulated against inflation with an increasing death benefit
  • No lengthy delays caused by probate court proceedings
  • Free from estate taxes 

How much money may be set aside in an Irrevocable Funeral Expense Trust?
In order for the funeral trust to not be overly scrutinized or potentially cause an issue in regards to the amount, the rules state that the amount must be of "fair consideration" which means that it should not exceed the average local cost of a funeral with each state having there own maximum limit as stated below;
  • Pennsylvania....Each of Pennsylvania's' 67 counties list their own max. limits. Such as in Allegheny                            County the max. is $15,000  Bucks County - $10,200, Dauphin County - $9,000 and                          so on, with their "fair consideration" test being met providing the trust does not                                    exceed the average local costs or limits by more than 25%.                                                                  See the county burial limits chart  by clicking HERE
  • New Jersey......$15,000 
  • Maryland..........$15,000 
  • Delaware..........$10,000

Questions? Email: lorrah@mymedicaidannuity.com or contact us at 855.471.6771 

An Irrevocable Funeral expense Trust can be set up by our office in a very short period of time, click HERE to fill out 1 simple form and you're done, we'll take care of everything else.

Thank You 


Note: the above is not intended for legal advice. consult an elder law attorney in your state for specific details regarding Medicaid qualification]]><![CDATA[2015 Alzheimer’s Statistics are staggering]]>Wed, 20 May 2015 17:20:21 GMThttp://www.mymedicaidannuity.com/blog/2015-alzheimers-statistics-are-staggering
2015 Alzheimer’s Statistics
                                                            
The Cost of Alzheimer’s Care
  • The cost of caring for Alzheimer’s patients in the U.S. is estimated to be $226 billion in 2015.           
  • The global cost of Alzheimer’s and dementia is estimated to be $605 billion, which is equivalent to 1% of the entire world’s gross domestic product.                                                                                    
  • Medicare and Medicaid are expected to pay $154 billion in 2015 for health care, long-term care and hospice for people with Alzheimer’s and other dementia.                                                                                 
  • Aggregate Cost of Care by Payer for Americans Age 65 and Older with Alzheimer‘s Disease and Other Dementias: Medicare $113 Billion, Medicaid $41 Billion,  Out of pocket $44 Billion, Other $29 Billion.                                                                                                                        
Alzheimer’s in the United States
  • 1-in-9 Americans over 65 has Alzheimer’s disease.                                                                              
  • When the first wave of baby boomers reaches age 85 (in 2031), it is projected that more than 3 million people age 85 and older will have Alzheimer’s.                                                                           
  • One-third of Americans over age 85 are afflicted with the illness.                                                       
  • 5.3 million Americans are living with Alzheimer’s disease.                                                                  
  • Unless a cure is found, more than 16 million Americans will have the disease by 2050.                      
  • Alzheimer’s disease is the 6th leading cause of death in America.                                                     
  • 1-in-3 seniors die with Alzheimer’s or another kind of dementia.                                                       
  • Typical life expectancy after an Alzheimer’s diagnosis is 4-to-8 years.                                                  
  • In 2014, the 85-years-and-older population includes about 2 million people with Alzheimer’s disease, or 40 percent of all people with Alzheimer’s age 65 and older.                                               
  • By 2050, there could be as many as 7 million people age 85 and older with Alzheimer’s disease, accounting for half (51 percent) of all people 65 and older with Alzheimer’s.                                          
  • Proportion of People With Alzheimer’s Disease in the United States by Age: 85+ years – 38%,  75-84 years, 44%, 65-74 years, 15%, <65 years, 4%                                                                                             
Racial Makeup of Alzheimer’s

65-74 Years of Age
  • 2.9% White
  • 9.1% African American
  • 7.5% Hispanic                                                                                                                                              
75-84 Years of Age
  • 10.9% White
  • 19.9% African American
  • 27.9% Hispanic                                                                                                                                       
85 Years of Age and above
  • 30.2% White
  • 58.6% African American
  • 62.9% Hispanic                                                                                                                                       
Projected Number of People Age 65 and Older (Total and by Age Group) in the U.S. Population With Alzheimer’s Disease, 2010 to 2050:

2010
Ages 65+: 4.7 Million

2020
Ages 65+: 5.8 Million

2030
Ages 65+: 8.4 Million

2040
Ages 65+: 11.6 Million

2050
Ages 65+: 13.8 Million

Who Gets Alzheimer’s Disease?
  • 2-in-3  people with Alzheimer’s are women.                                                                                           
  • African American and Hispanic Americans are more likely to develop Alzheimer’s than white Americans.                                                                                                                                              
  • North Dakota has a higher rate of Alzheimer’s mortality than any other state (54 Alzheimer’s deaths a year per 100,000 residents)                                                                                                     
  • Alzheimer’s mortality is lowest in Nevada (11 Alzheimer’s deaths a year per each 100,000 residents)                                                                                                                                                
  • 30% of people with Alzheimer’s also have heart disease, and 29% also have diabetes.                         
Caregiving
  • More than 40% of family caregivers report that the emotional stress of their role is high or very high.  
  • In 2014, Alzheimer’s and dementia caregivers had $9.7 billion in additional health care costs of their own.                                                                                                                                                         
  • In the 2009 NAC/AARP survey, caregivers most likely to indicate stress were women, older, residing with the care recipient, and white or Hispanic. In addition, these caregivers often believed there was no choice in taking on the role of caregiver.                                                                                              
  • People with Alzheimer’s disease are hospitalized three times more often than seniors without Alzheimer’s.                                                                                                                                             
  • Seventy-four percent of caregivers of people with Alzheimer’s disease and other dementia reported that they were “somewhat concerned” to “very concerned” about maintaining their own health since becoming a caregiver.                                                                                                                                                 
  • 68% of nursing home residents have cognitive impairment from Alzheimer’s disease or a related disorder.                                                                                                                                                  
  • 52% of assisted living facilities provide dedicated memory care for residents with Alzheimer’s disease.                                                                                                                                                   
  • In 2014, more than 15 million Americans provided more than 17.9 billion hours of unpaid care for people with Alzheimer’s disease and other dementia’s.                                                                            
  • More than 15 million Americans provide unpaid care for people with Alzheimer’s disease and other dementia’s.                     


Sources:

Alzheimer's Association
Centers for Disease Control

Questions?  Email us at lorrah@mymedicaidannuity.com
]]><![CDATA[Don’t confuse IRS tax laws with Medicaid rules in regards to Gifts]]>Wed, 20 May 2015 15:55:56 GMThttp://www.mymedicaidannuity.com/blog/dont-confuse-irs-tax-laws-with-medicaid-rules-in-regards-to-giftsPicture










Both Medicaid and the IRS have their own set of rules about the consequences of making gifts and  both apply to any gifts that you make. We often see people getting the two sets of rules confused. 

The following will help you understand the different sets of rules the IRS and Medicaid apply to gifts.

IRS Rules on Gift Tax 
The definition of "gift" by the IRS  - Any transfer to an individual, either directly or indirectly, where full consideration (measured in money or money's worth) is not received in return.

While the IRS definition of what is considered a gift is very similar to that of Medicaid, how it is treated is very different.The lifetime gift exemption amount is not something that will come into play with Medicaid, the new 2015 lifetime gift exemption limits will increase to $5,430,000. Meaning you may make gifts of up to that amount during your lifetime without paying gift tax, however, such gifts must be reported to the IRS on a gift tax return. [anyone concerned with that amount is not applying for Medicaid]. In most situations, transfers of any amount to your spouse, either during lifetime or at death, are not subject to gift tax. The annual gift amount is where many people get confused with regards to Medicaid. The annual gift amount will stay at $14,000 per year, per person, without having to file a gift tax return with the IRS. You can give away $14,000 to as many individuals as you’d like. A husband and wife can each make $14,000 gifts. So a couple could make $14,000 gifts to each of their four grandchildren, for a total of $112,000.

  
Medicaid Rules on Gifting 
The Medicaid rule regarding Disposition of Assets and Fair Consideration refers to"Gifts" or transfers of assets and is described as [when an individual, the individual's spouse or another acting on their behalf disposes of or transfers assets for less than Fair Market Value. Assets include all income and resources]. There are a few exceptions to this also which we'll review below. 

If these gifts or transfers occur within 60 months of the application for Medicaid benefits, the individual may be disqualified from receiving benefits for a certain period. This is referred to as a “penalty period”. This penalty period is calculated by dividing the total value of uncompensated gifts or transfers by the penalty divisor of your state [which is equal to the average private patient cost of nursing facility care in your state at the time of application for benefits]. The result is the number of days you will have to wait until you will be eligible for Medicaid to pay for long-term care services. The ineligibility period starts to run on the day the application is otherwise approved. So, the $14,000 gift that's allowed by the IRS may count towards disqualification of Medicaid benefits. 

Exceptions

Medicaid allows for exceptions to the Fair Consideration rule as follows;
  • The individual's spouse or to another for the sole benefit of the individual's spouse.

  • Another for the sole benefit of the individual's spouse, by the individual's spouse.

  • The individual's child who is under 21 years of age, or the individual’s child age 21 or older who is blind or permanently and totally disabled.

  • A trust established solely for the benefit of the individual's child age 21 or older who is blind or permanently and totally disabled.   

    • A trust established solely for the benefit of an individual less than 65 years old who is disabled.                                                                                                                  
    NOTE: blind or permanent or total disability of the child must meet SSI criteria specified in 42                             U.S.A. § 1382c(a)(3).


Preserving Assets
Although early planning is almost always best, you can preserve a significant amount of assets even if a family member is already in the nursing home with the proper tools.

Example,
Mary’s husband has been in the nursing home for two years. When he entered the facility they had $380,000 in savings and investments. Now with only $183,000 left, Mary would like to know, what can she do to get her husband approved for Medicaid benefits and preserve the money she has left.

Fortunately, Mary can purchase a Medicaid Qualified Annuity, her husband will then be eligible for Medicaid immediately and the remaining $183,000 will be preserved for her. However, Mary could have used the same tool 2 years ago when her husband entered the nursing home, which would have preserved the entire $380,000 of savings for her. [Funeral Expense Trusts may be used in conjunction with the annuity also]
 
Hopefully, this will help.

As with all of our posts, the above is not intended to be legal or tax advice. Medicaid and the IRS are extremely complex and confusing. We always recommend that you seek the advice of a qualified accountant and a qualified elder law attorney. 


The above facts pertaining to Medicaid were derived Medicaid rule 440.8 regarding Disposition of Assets and Fair Consideration.


Questions?  Email us at lorrah@mymedicaidannuity.com 


Thank You

 

]]><![CDATA[Medicaid’s limit for “Community Spouse” Minimum Income Allowance [MMNA] to Increase on July 1, 2015 to $1,991.25]]>Tue, 19 May 2015 15:10:49 GMThttp://www.mymedicaidannuity.com/blog/medicaids-limit-for-community-spouse-minimum-income-allowance-mmna-to-increase-on-july-1-2015-to-199125Single recipients of Medicaid long-term care services in nursing homes are expected to use most of their income to pay a share of the cost of their nursing home care, commonly referred to as “patient pay liability”. Medicaid then pays the difference between the recipient’s share of cost and the Medicaid payment rate.

Medicaid law was amended in 1988 in response to evidence that at-home spouses [also known as “community spouses”] faced poverty and a radical reduction in their standard of living before their spouses living in a nursing home could qualify for Medicaid. The Medicaid “spousal impoverishment” provisions were put into place to protect the community spouse when the institutional stay of the nursing home resident has lasted or is expected to last at least 30 consecutive days.

Federal law prescribes income protection of a minimum maintenance needs allowance (MMNA) for the community spouse. Federal law prescribes that the MMNA should equal at least 150% of the federal poverty level for a couple and be adjusted every year by the general rate of inflation [The Pennsylvania MMNA is adjusted on July 1st of each year].

The community spouse keeps all of his or her own income plus half of any shared income. If this total is less than the MMNA, then the institutionalized spouse must be allowed to supplement the community spouse’s income in an amount that increases the community spouse’s total income up to the applicable MMNA. If the income level of the community spouse is very low, he or she may receive all of the combined marital income. 

Example: Mr. and Mrs. Smith have a joint income of $3,000 a month, $1,700 of which is in Mr. Smith's name and $700 is in Mrs. Smith's name. Mr. Smith enters a nursing home and applies for Medicaid. The Medicaid agency determines that Mrs. Smith's MMMNA is $2,000 (based on her housing costs). Since Mrs. Smith's own income is only $700 a month, they may allocate $1,300 of Mr. Smith's income to her support. Since Mr. Smith also may keep a $60-a-month personal needs allowance, his obligation to pay the nursing home is only $340 a month ($1,700 - $1,300 - $60 = $340).

Conversely, a community spouse with a high total income may receive little or no supplementary income from the institutionalized spouse. In such a case, even if the income of the community spouse is considerable, the Medicaid program cannot require that any of it be applied toward the cost of the institutional spouse’s care.

Medicaid rules provide three pathways for community spouses to obtain a higher MMNA. 
  • First, the allowance may be raised (though only as high as the Federal maximum allowance) for community spouses who show that they have exceptional housing costs, defined as more than 30% of the standard allowance. 
  • Second, they can receive a larger allowance if a state Medicaid hearing finds that exceptional circumstances might otherwise cause them extreme financial hardship.
  • Third, they may seek a court order for additional support.


Medicaid rules are extremely complex and confusing. We always recommend that you seek the advice of a qualified elder law attorney.

Facts and figures are from U.S. Department of Health and Human Services

Email: lorrah@mymedicaidannuity.com

Website: www.mymedicaidannuity.com

]]><![CDATA[Why Long Term Care Insurance May Not be Your Best Choice]]>Mon, 18 May 2015 14:48:47 GMThttp://www.mymedicaidannuity.com/blog/why-long-term-care-insurance-may-not-be-your-best-choiceWhy Long Term Care Insurance May Not be Your Best Choice

 People have become increasingly aware of how easily long-term care (LTC) for seniors can wipe out a lifetime's savings -- and insurance companies have been quick to capitalize on that fear. Long-term care insurance, also known as nursing home insurance, has been widely advertised as protection against the costs of long-term care, particularly residential nursing facilities. However, this kind of insurance is expensive, and it often provides only limited benefits -- with many restrictions and conditions -- that may end up covering only a small percentage, or nothing at all, of your total long-term care costs.

Insurance companies market long-term care insurance by suggesting that consumers are likely to wind up spending years in a nursing facility -- a prospect that would wipe out their savings and perhaps leave them without a roof over their heads. However, the actual odds of a long nursing facility stay are considerably lower than the insurance industry would like you to imagine.

 When you consider the true odds of a long nursing facility stay along with the high cost of LTC insurance and the other things you could do with that premium money, you may find that for you -- as for the 95% of the population over age 65 who have not invested in it -- LTC insurance is not a good bet.

 The Performance of Long-Term Care Insurance

The relatively slight chance that an elder will need years of nursing facility care means that insurance companies do not pay out on their policies to nearly the extent that they suggest when they sell the policy.

When the policies' conditions, exclusions, and benefit limits are figured in, the performance of these policies has been quite poor;

  • About half of all LTC policies lapsed before any benefits were paid; policy holders were unable or unwilling to continue paying their premiums [mainly due to increased premiums and/or decreases in incomes and resources].

  • Of those people who bought insurance and later entered a nursing facility, about half never collected a dollar from their LTC policies.

  • No benefits were ever paid to the many people who bought nursing facility coverage but instead received home care or entered a residential facility not covered by the insurance.

  • Many passed before the end of the 90 day elimination period the policies have.

  • When LTC benefits were paid, they were usually far below the actual cost of care.

  • For many of the longest-term residents, benefits were used up before the nursing facility stay ended.


The Truth about Nursing Home stays;

The average length of stay in a nursing home for elderly citizens is not nearly what they suggest when they sell the policy either.

The stats that most insurance companies use are eschewed, they use an average stay of 892 days [2.4 years]… however, those figures are based on the average stay of those who are discharged from a nursing facility [usually for rehab or those you are younger and recover from their stay]. The Elderly or those with Dementia and Alzheimer’s don’t recover and go home. The stats below are for the average stay for the Elderly or those with Dementia and Alzheimer’s

  • Most nursing facility stays are brief, according to Morningstar and About Health - 65% of people who enter a nursing home die within 12 months.

  • 53% of all nursing facility stays last less than six months.

  • Only 10% of all nursing facility residents will stay longer than 2 years.


So, while it may be right for some individuals to purchase Long Term Care Insurance, advisors usually say “those with significant assets”, the average person may not be a good candidate.

 
What are some alternatives?

  • Life Insurance – there are life insurance plans that can be put in place specifically to pay for long term care costs [they have a specific rider attached], upon the need of long term care you can use the funds for any purpose whether in a nursing home or at home care, any additional funds are paid to your beneficiary. [unlike LTC insurance where premiums are lost if not needed or benefits are not fully used]. The premiums are generally considerably lower than LTC insurance and they are fixed and will never increase.

  • Medicare will pay the first 100 days in a nursing home following a 3 consecutive stay in a hospital [the first 20 days are paid in full, the other 80 are on a co-pay].

  • Medicaid - Consult an Elder Law Attorney and pre-plan for Medicaid. It’s not just for those in poverty. A significant amount of assets can be protected from Medicaid if you start early [prior to the 60 month look back period that Medicaid has], even if it’s less than 60 months, you still have options.

There are other financial products available also, please consult a qualified elder law attorney and/or financial advisor for more information.

Stats are thanks to;

Morningstar:  http://www.morningstar.com  

About Health:  http://www.about.com/health

NOLO:  http://www.nolo.com  


Note: the above statements are a combination of research, facts, opinions and statistics. Always consult an elder law attorney and/or a qualified financial advisor when pre-planning for long term care.


Questions?  Email us:  lorrah@mymedicaidannuity.com    

website:  www.mymedicaidannuity.com

]]><![CDATA[Purchasing a Medicaid Annuity with a 1035 Exchange]]>Sat, 16 May 2015 17:14:51 GMThttp://www.mymedicaidannuity.com/blog/purchasing-a-medicaid-annuity-with-a-1035-exchange
If you or a loved one is either in or about to enter a nursing home and are interested in sheltering your assets and qualifying for Medicaid benefits, a Medicaid Annuity will do just that. A great way to fund a Medicaid annuity is through an IRS 1035 exchange.

A 1035 exchange allows you to replace an existing annuity or life insurance policy that may no longer meet your needs for one that better suits your current situation. 

How to avoid income tax on any gains in the "old" contract.
Generally, the surrender of an existing insurance contract is a taxable event since the contract owner must recognize any gain on the "old" contract as current income. However, under IRC Section 1035 when one insurance, endowment, or annuity contract is exchanged for another, the transfer will be nontaxable, provided certain requirements are met.

The IRS has indicated through Private Letter Rulings that it will apply a strict interpretation to the rules. For a transaction to qualify as a 1035 Exchange, the "old" contract must actually be exchanged for a "new" contract. It is not sufficient for the policyholder to receive a check and apply the proceeds to the purchase of a new contract. The exchange must take place between the two insurance companies.


Requirements & Guidelines
The owner and insured, or annuitant, on the "new" contract must be the same as under the "old" contract. However, changes in ownership may occur after the exchange is completed. 

The contracts involved must be life insurance, endowment, or annuity contracts issued by a life insurance company.

These are the types of exchanges which are permitted:
  • from an "old" life insurance contract to a "new" life insurance contract
  • from an "old" life insurance contract to a "new" annuity
  • from an "old" endowment contract to a "new" annuity contract
  • from an "old" annuity contract to a "new" annuity contract. 

(Note: An "old" Annuity contract cannot be exchanged for a "new" life insurance contract.)


How to preserve the adjusted basis of the "old" policy
Preserving the adjusted basis is preferable in situations in which the "old" contract currently has a "loss" because its adjusted basis is more than its current cash value. The adjusted basis is essentially the total gross premiums paid less any dividends or partial surrenders received. This basis carryover is important when the owner has a high cost basis in the "old" contract.

For example, Brenda has a Whole Life policy she purchased 15 years ago. She paid $1,000 annual premium for the last 15 years and has received $5,000 in policy dividends. The policy currently has $6,000 in cash value. Jane's cost basis is $10,000 (15 x $1,000 less $5,000 dividends.) If Brenda did not exchange the "old" policy for the "new" one, but rather surrendered it and purchased the "new" policy with the $6,000 surrender value, she would only have a $6,000 basis in the "new" policy. If, however, she exchanges the "old" policy, she will preserve the $10,000 cost basis.


Can Multiple contracts be exchanged?
Yes, Two or more "old" contracts can be exchanged for one "new" contract. No limit is imposed on the number of contracts that can be exchanged for one contract. However, all contracts exchanged must be on the same insured and have the same owner.


Can a Partial 1035 Exchange of Annuity be done?
Yes, The IRS, in Revenue Procedure 2011-38 (effective October 24, 2011) provided new guidance on the treatment of such partial 1035 exchanges of annuity contracts.


Questions?  Call us Today 844.207.1277


Visit us at mymedicaidannuity.com 
 




]]><![CDATA[How to Use a Medicaid Annuity to Shelter Assets and Qualify for Medicaid]]>Fri, 15 May 2015 19:08:54 GMThttp://www.mymedicaidannuity.com/blog/how-to-use-a-medicaid-annuity-to-shelter-assets-and-qualify-for-medicaidWhat are Medicaid Qualified Annuities?

This type of annuity is used when an individual needs to qualify for Medicaid but has resources over and above the limits permitted by Medicaid guidelines.

Medicaid Qualified Annuities are an essential tool for Medicaid planning, they take excess countable resources and convert them to a stream of income. The income is then passed to the spouse of the individual in the nursing home supplementing their income and preserving the family assets or in the case of a single individual, it can be used to fund the nursing home at a reduced “Medicaid rate” [which is usually up to 55% less than private pay rates] which will allow the funds to last longer. The individual can also “gift” a portion of their resources and use the rest to fund the nursing home temporarily during the “penalty period”. See below and our webpage for more detailed examples.

Medicaid annuities are funded with a single payment, they are immediate annuities, meaning they begin paying an income immediately or within 2 months and they are structured to meet the guidelines set by the Deficit Reduction Act of 2005 section 6012. They are available only through a select few insurance companies and are generally used as Individual and Community Spouse Medicaid Qualified Annuities.

What is the Deficit Reduction Act [DRA]?

The DRA was signed on Feb. 08, 2006 and in part, established new guidelines for Medicaid including the eligibility criteria. Section 6012 particularly refers to the evaluation and treatment of annuities as related to eligibility. It states that in order to not be treated as a transfer, the annuities must meet certain guidelines as stated below;

1. The annuity must be irrevocable and non-assignable

2. The annuity must be actuarially sound, meaning the payment schedule must not exceed the life         
     expectancy of the annuitant [person receiving the payments].

3. The annuity must provide payments in approximately equal amounts with no deferred or balloon 
    payments.

4. The state agency must be named ass remainder beneficiary;
             a. Under the DRA the annuity must name the state as the beneficiary in the first position [from 
                 this, they will recoup the dollar amount of Medicaid benefits paid to the individual only]. 
                 Unless there is a community spouse and/or a minor or disabled child.

             b.  If there is a community spouse and/or a minor or disabled child, the state may be named in 
                  the 2nd position after those individuals.


What are the benefits of a Medicaid Qualified Annuity?

1. Reduce or eliminate the high cost nursing home care with quicker Medicaid qualification.

2. Converting excess countable resources to a non-countable income stream for the community 
    spouse will accomplishing 2 goals;

       a. Preserve assets and prevent them from being used for the high cost of nursing home care.
       b. Prevent the community spouse from having insufficient income to pay for daily needs and  
           expenses.

3. A single individual can purchase a Medicaid annuity and convert excess resources to an income 
    stream, immediately qualifying for Medicaid. Then use the income to fund their nursing home 
    costs at a reduced Medicaid rate [up to 55% less than private pay]. Their funds will then last 
    longer and there’s a potential to pass along the excess to their beneficiaries.

4. Asset protection for a single individual. The annuity will shelter assets and allow you to pass them
    to a family member. Example - "gifting" a portion of excess resources to a family member [this 
    will trigger a penalty based on the amount gifted], use the remaining [after calculating how much
    is be needed to properly fund penalty period] to purchase an annuity which will pay the nursing
    home during the penalty period. The assets are sheltered and once the penalty period is over the   
    individual will immediately qualify for Medicaid, which will pay the full amount of nursing home costs.

Please note:  The above examples have been simplified to save space.  Click to view more detailed examples of techniques used to save tens or even hundreds of thousands of dollars and help financially qualify the individual for Medicaid.

For more information please visit our website…. www.mymedicaidannuity.com

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