I am approaching retirement and still in great health. What are some long-term care planning options aside from a long-term care insurance policy?
For those who are considering their options in long-term care planning, one of most pivotal issues to consider is eventual eligibility for Medicaid. Unlike Medicare, Medicaid is the only government health insurance program that provides full coverage for the staggering costs of residing in a nursing home. But, only those meeting certain income and asset requirements will qualify. What’s more, for married couples – with only one spouse needing care – using one’s savings to pay for long-term care can render the community spouse nearly destitute. To avoid this result, many couples begin transferring assets from their personal name to that of an irrevocable trust or family member. However, use of annuities is another lesser-known option to help couples remain financially independent while still planning for the future.
When determining Medicaid eligibility, the state of California will look at each spouse’s assets and income. Couples that have too much income or maintain too many assets will need to “spend down” these resources to reach the acceptable threshold level. For income purposes, only income payable to the Medicaid recipient is counted for eligibility, so income payable to the community spouse will be excluded from the computation. This is where the purchase of an annuity comes into play to allow the community spouse to enjoy a steady income stream without disqualifying his or her spouse from valuable government long-term care benefits.
To maximize this option, the community spouse must convert all assets (i.e., investments, stocks, IRA’s) into an annuity, and the final payment must be receivable within that spouse’s expected lifetime. The type of annuity used in this situation differs from the investment-type annuity, however, and is repayable to the annuitant immediately after a lump sum transfer is made – known as a Single Premium Immediate Annuity (SIPA). So long as the SIPA is irrevocable, non-transferable, and purchased from a commercial insurance agency, the spouse needing long-term care will be able to maintain Medicaid eligibility without impoverishing the community spouse in the process.
For more information about how a SIPA can help a community spouse maintain financial freedom and independence, contact California estate and long-term care planning attorneys at OC Wills and Trust Attorneys.