Recently, the United States Court of Appeals for the Third Circuit ruled that short term annuities are a viable Medicaid planning tool for nursing home residents attempting to protect a portion of their resources and qualify for Medicaid benefits.
Many people believe that in order to qualify for Medicaid in a nursing home, you must deplete all of your resources. This is not correct. Medicaid annuities permit you and or/ your spouse to protect a significant portion of your resources.
Previously, the use of short term annuities in Medicaid planning was under assault by the Commonwealth of Pennsylvania. On appeal, however, the Third Circuit Court ruled that these annuities are legitimate planning tools to help you and/or your family members qualify for Medicaid. As long as the annuity meets federal requirements, it is acceptable.
If you require admission to a nursing home, you will be able to protect approximately one-half of your countable resources. For example, you could gift one-half of your resources to a child or other relative and then apply for Medicaid. The Pennsylvania Department of Human Resources would find you ineligible for Medicaid due to the gift. The period of your ineligibility would depend on the size of the gift. Simultaneously with the making of the gift and applying for Medicaid, you would purchase a Medicaid annuity with the remaining one-half of your resources, and the annuity would pay out only during the ineligibility period. During this period you would pay the nursing home privately by using the proceeds from the annuity and your monthly income. At the end of the ineligibility period, the annuity would be completely exhausted, you would qualify for Medicaid, and your children would keep the gift.
In summary, short-term annuities are a valuable tool to help you protect your resources if you are admitted to a nursing home. If you have questions about annuities, you should contact an elder law attorney.