FAQ: What does it mean for an annuity to be “Medicaid friendly”?

It is very common to hear annuities described as “Medicaid friendly.” Most people hearing the words “Medicaid friendly” would assume that assets placed in such an annuity will be protected from the cost of long term care and indeed, they may even be told so by an insurance professional or financial advisor. But under Michigan law, an annuity by itself does nothing to protect assets from the cost of long term care. In fact, without careful planning, simply investing in a Medicaid friendly annuity may result in the unnecessary loss of assets. Understanding why this is the case requires some understanding of estate planning, elder law, and annuities. But taking the time to understand these things can easily save tens if not hundreds of thousands of dollars. Moreover, understanding these points can help you to see why your estate plan must work in conjunction with your financial plans in order to receive the full benefit of an annuity.

Estate planning is traditionally thought of as the field of law concerning the distribution of assets at the time of one’s passing. Modern estate planning encompasses planning not only for distribution on death, but also planning for disability and asset protection. Planning for disability will greatly increase the likelihood of having something to pass on to heirs, while at the same time reducing stress and maximizing one’s own independence. But in order to effectively manage a one’s affairs through a period of disability, there must be a close relationship between the estate plan and the financial arrangement, including the types of investments used.

FAQ: I have been turned down for Veterans’ Benefits. What now?

Question: I approached my local Veterans’ Administration office for information about the Aid and Attendance Pension. They told me I had too much money to receive the pension. But I have reoccurring medical expenses of more than $1,000.00 per month. Is there anything I can do?

Answer: This is a delicate situation. On the one hand, some estate planning could allow you to qualify for the Aid and Attendance Pension. On the other, you would be mistaken to think that qualification for the Aid and Attendance Pension alone is sufficient. You need to be planning ahead for Medicaid long-term care at the same time that you are qualifying for veterans’ benefits.

FAQ: What assets are exempt from Medicaid qualification?

QUESTION: I have heard that you are allowed to keep some things and qualify for long-term care Medicaid. What are you allowed to keep?

ANSWER: It is true that some property may be exempt for purposes of Medicaid qualification. And indeed, converting non-exempt assets to exempt assets is one valuable method of spend down. The following items are generally exempt:

FAQ: Do I have to sell my home?

QUESTION: I am concerned about my parents. My dad just entered the nursing home. His care costs more $6,000.00 per month and my mother is almost out of savings. Does she have to sell the house (which is worth about $250,000.00) to pay for my dad’s care? And what about estate recovery? What is that?

ANSWER: Your mother does not have to sell the house and for now, it is safe as long as you follow the proper procedures to qualify for Medicaid. But there are still several concerns here.

First, most people needing nursing home care will end up receiving Medicaid assistance at some point. Many people make the mistake of thinking that they should just pay the nursing home each month without realizing that there are often estate planning options that can prevent the need for a full spend down. Seeing an elder law attorney during a nursing home spend down is a lot like seeing an accountant at tax time: there are a lot of deductions and exclusions that you would not otherwise know about that can cut your tax bill. An elder law attorney can help you minimize your nursing home bill in the same way.