Coastal Senior is a monthly periodical covering the South Carolina and Georgia low country. Bob Mason is its legal columnist.
[Note: The Georgia annuity rules described below are very similar to the North Carolina annuity rules – see discussion of annuities at Basic North Carolina Medicaid Nursing Home Rules]
The Georgia Department of Community Health recently changed Medicaid annuity rules to allow the use of some (not all!) annuities by someone entering a nursing home.
The Basic weight loss med Concept
First, understand the basic concept of an annuity. Someone pays money to a company. The company promises to pay the money back either in a lump sum in the future, or over time in regular installments. The payments could begin immediately (an “immediate annuity”) or start in the future (a “deferred annuity”).
The payments from the company will include a return of what was paid, plus some interest. Meanwhile, the company is taking the money and (it hopes) making more with it than it will have to pay back to the buyer.
There are many and complex reasons that such an arrangement might make sense with respect to a realistic portion of one’s nest egg (remember the old adage “don’t put all your eggs in one basket”).
The New Rules
If an annuity fits the new requirements, it will not count as an asset for Medicaid purposes (although the income will count). To be “noncountable” the annuity must be nonassignable, irrevocable, and have a steady stream of payments that will not extend beyond the life expectancy of the annuitant (the person receiving the payments).
Further, the annuity must name the State of Georgia as the remainder beneficiary to the extent the state has paid out Medicaid benefits. A spouse and a disabled child may take first place ahead of the state.
Many seniors have a modest nest egg meant to sustain retirement. The problem is the egg may be too big for Medicaid. Most people entering their senior years understandably panic when a spouse goes into a nursing home to the tune of $5,500 or so a month.
A “new” annuity can take “excess” cash (which was an excess asset for Medicaid purposes) and put it into an annuity (the shorter time frame the better) to immediately begin paying the stay-at-home spouse income.
Voila! The excess asset (cash) is converted into income that is not counted for Medicaid purposes (the state would count the income of the spouse in the nursing home only).
On The Other Hand . . .
Any person who thinks he or she (or his or her spouse) might end up in a nursing home within several years and have a tough time paying for it better be very careful before buying an annuity.
Buy an annuity that is not designed correctly and Mom and Dad could have an expensive mess. If the annuity has substantial surrender charges the unfortunate buyer has a choice: Hang on to the annuity and never qualify for Medicaid or dump the annuity and take a bath.
Buy an annuity that is designed correctly and it could be part of a well-conceived plan.
There are plenty of great financial advisors out there who either know these rules or at least understand that this is an issue and will seek additional help.