Purchasing an Immediate Annuity to Qualify For Medicaid

If you are going to need long-term care at some point in the future, and have no insurance of any kind to pay for it, then you may be seriously considering spending down your assets in order to qualify for Medicaid. If this is the case, then converting some portion of your non-exempt assets into an annuity may be a viable strategy. Of course, if this is what you intend to do, then an immediate annuity with an irrevocable payout option must be used. The payout must be irrevocable because the entire contract will be valued with the owner’s assets if the owner has the power to change the payout terms.  In order to have the annuity be exempt to quality for Medciaid, the payout must be set up a a lifetime payout based on the Medicaid life expectancy tables. But while the transfer of assets into the contract will effectively exempt them for Medicaid purposes, care must be taken to ensure that the income stream paid out by the annuity does not exceed the amount allowed under the Medicaid spend-own rules. If this should happen, then the irreversible payment schedule would leave you with no way to reduce the income [...]

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