Does anyone have direct experience buying and utilizing a Medicaid Complaint Annuity (MCA)? Please share your direct experience. I'm especially curious if beneficiaries received unused funds if loved one died before the spend down was over. We are thinking about an MCA, but wondering about the overall spend-down process and the pitfalls (if any) of using an MCA. Thank you in advance.
But if my hubs in his 70’s like next month unexpectedly needed a NH and could be eligible for LTC Medicaid and we could find a Medicaid approved facility that could provide his care, I’d do a SPIA. It would mean working with a CELA level of elder law attorney and FA as stuff would need to be sold off so there’s $ to go into the SPIA. I’m somewhat younger so have like 20-25 years of payout before it defunds. There a handful of firms that do them, Krause is a market leader for SPIA for spouses. Imho to do a spouse SPIA need at least 200-300k to get any kind of decent monthly payout and start it before yourself drawing your own SS $. I know of 2 spouses who have done SPIA, both younger & with dependent kids. There was a poster on AC, Old Bob, who did one as his lovely wife was very young Alzheimer’s and sadly needed to go into a LTC facility. (She died last year, he doesn’t seem to post anymore). If your a CS, I do think SPIA are something to carefully look into for planning with your CELA atty. CS / NH spouse stuff for Medicaid regulations is way way complicated and not ever a DIY imo.
Annuities are about doing tax deferral or reduction as an investment strategy. The usual annuities are revocable, assignable and have a cash value. This is overwhelmingly what is sold. It’s not speciality underwriting. But a true MCA are irrevocable, non assignable with zero cash value plus must be actuarial sound for Medicaid rules for your state. Big huge difference. Both types with commissions & fees and can be quite quite lucrative for the insurance agent or broker selling it.
There seems to be the selling of “Medicaid Friendly” annuities that happens, without these being actually fully Medicaid compliant.
Like say mom sells her home and places 123k into an annuity in her name, it’s ok & Medicaid Friendly as it’s her $ going into something in her name which she owns. But it may not be truly be compliant for your States Medicaid rules; its on you to make sure it is.
The AC poster I mentioned earlier whose moms annuity defunded at 100, was racing against time to get it defunded way way ahead of moms 100th birthday; so every year she as moms dpoa took the maximum allowable out without penalty from that annuity, used $ to pay for moms care & got it defunded in the year before her mom died in MC. Had She not done this & her mom actually lived another year, she would have outlived her money and applied for LTC Medicaid. The annuity would make the application ineligible as it was not actuarial sound (defunded at 100) so it would have needed to be a forced cashed out - which means fees and penalties- before her mom could be eligible for LTC Medicaid. Btw the annuity was sold to the mom by a family member who got a nice commission on it....
You might want to google Takacs McGinnis “Medicaid Friendly” as really good articles explaining the pitfalls.
long story short, Imo CS SPIA = yes, NH resident MCA = no.
MCA for an elder, to me, is totally meh. I think the “ok for Medicaid” is a bit of a rouse. It’s their asset that is placed in their name so it’s not gifting so is “ok” so not subject to Medicaid transfer penalty; it’s a strict contract which has restrictions, fees and commissions.
The bigger issues are to me are
- they have to be actuarially sound for Medicaid compliance. Annuity cannot run out 10-20-30 years like you might can do with a regular annuity. I’d suggest that you get the #’s run before doing this. If they are pretty old & it has to be paid out and defunded in 3 years to be actuarially sound, personally I wouldn’t bother to set up and pay commissions and whatever fees tacked on. Just go a regular private pay spend down the $. Then once at 2k, you as the DPOA apply for LTC Medicaid for them. It will keep you in control of the $, so say they need emergency dental work done, you can easily tap into thier $ to pay for.
- if they are really really old, and it’s quite a bit of $, the monthly payout may be over the income maximum allow for LTC Medicaid. So again you have to have the #s run ahead of committing to buying the annuity.
- Trying to get $ outside of the monthly payout is pretty limited for annuities. I’d suggest you ask in detail on this. Usually will be a one time low % annual defund / withdrawal you can do without penalty, but otherwise there will be hefty costs. There was someone on this site who’s mom had an annuity that defunded at 100, she had to every year file to get the max withdrawal; took abt a decade to get it to defund earlier without fines.
- State, I’m pretty sure, must primary beneficiary. So once they die, as annuity belongs to the state, so state sets the timetable as to if $ left and paid to secondary beneficiary.
If the annuity $ plus SS $ and any other monthly income, isn’t enough to pay for the facility, and Medicaid LTC is paying facility a daily room&board reimbursement, that R&B is building a tally paid by Medicaid. State is required to attempt to recover costs paid. As State is beneficiary, it gets deducted from whatever left in the annuity that State controls. You need to clearly ask an atty familiar with estate recovery as to how the state does this and if there are any offsets possible.
Also ask about commissions and fees. Like you want a schedule for all paid till it defunds. If insurance agent is at all reticent on providing this, they are making off like bandits on commissions and fees, imo.
In the case of a Special Needs Trust, there is a beneficiary who comes in second to Medicaid. With my nephew, Medicaid gets their money back first, anything left over goes to the beneficiary.
I dont have experience, but all the reading I've done indicates that this is a technique that is useful when there is a spouse who will remain in the community.
The state is the beneficiary of the trust, not family members.