Annuity

John and Mary have been frugal over their lives and have saved a sizable estate of $200,000. Their only income is social security with John receiving $2,000 per month and Mary getting $800 per month. This is what they live on supplemented by $4,000 per year in interest (5%) from their savings. John and Mary did no estate planning and suddenly Mary age 80 has a stroke and goes into the nursing home. Using Medicaid rules John ends up with most of the income (his $2,000 and her $800) but that still leaves him short each month. John can purchase a Medicaid-compliant annuity to protect the $200,000 from Medicaid recovery and still get the income. It is a way to transfer assets to income and is not limited by the five year look back. The type of annuity is very specific and must be set up by a knowledgeable Eldercare attorney. It must be irrevocable and immediate meaning John gives up control of the $200,000 but starts getting a check each month. The duration must be less than John's life expectancy. John is 80 years old so his life expectancy is 7 year so he get $28,000 per year for the next 7 years. If John dies while there is still money in the annuity the proceeds go to Medicaid. Medicaid-compliant annuities allow applicants to meet Medicaid’s asset criteria by reducing their non-exempt assets, thus making them eligible for Medicaid benefits, such as long-term care. For married couples, Medicaid-compliant annuities enable the healthy spouse to continue receiving supplementary income.