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CATEGORIES:  Elder Law, Medicaid Planning, Crisis Planning, Advance Planning, Asset Protection, Nursing Home, Long Term Care, Elder Care Attorney

Medicaid pays for 63% of all long-term care in the United States.  Long-term care, particularly memory or other specialized care, may cost in excess of $5,000.00/month.  Because many seniors cannot afford such expenses over the long term, Medicaid may need to be utilized to pay the senior’s long-term care bills.

Where there is one spouse within a senior couple who needs long-term care, and where Medicaid will be required to finance these expenses, an elder law attorney may utilize Medicaid planning techniques to help the couple preserve as many assets as possible.  Incorporating a Medicaid-compliant (or Medicaid-qualified) annuity may help the ill spouse to qualify for Medicaid, while preserving assets for the well (community) spouse.


When a person purchases an annuity, he or she invests a principal amount in exchange for a stream of future payments (normally with interest) which is returned to the investor.

The most important feature of a Medicaid-compliant or Medicaid-qualified annuity is that once the principal investment is made, Medicaid no longer counts the stream of future payments received back by the investor as Medicaid “countable assets.”  Thus, previously countable Medicaid assets may be shielded from Medicaid by converting them to a future income stream emanating from a Medicaid-compliant annuity.


Medicaid-qualified annuities are most useful where an ill spouse needs to qualify for a nursing home (or other long-term care facility), and the well spouse (community spouse) desires to stay at home.

Suppose an ill spouse, who cannot have more than $2,000 in assets to qualify for Medicaid, is $100,000 over resource (or has $100,000 too many liquid assets to qualify for Medicaid.)

Because the ill spouse can transfer an unlimited amount to the community (well) spouse, he transfers the $100,000 to his wife.  If the $100,000 was still in excess of the wife’s Medicaid community spouse resource allowance (CSRA), the wife can purchase a $100,000 Medicaid-compliant annuity to immediately transfer the wife’s countable $100,000 asset into a stream of Medicaid-exempt income payments.

Income is counted by Medicaid only if payable to the Medicaid applicant.  Income to the community spouse is specifically excluded by Medicaid, thus the community spouse is allowed to keep all income payable to the community spouse.  The husband’s $100,000 countable asset has been transferred by the $100,000 Medicaid-compliant annuity into an exempt source of monthly income payments for the community spouse.  Her ill husband now qualifies for Medicaid.

Once the Medicaid applicant qualifies for Medicaid, the Medicaid beneficiary must only show on an ongoing basis that he does not have $2,000 in assets.  So even though the community spouse receives a monthly annuity check that could accumulate into an asset if saved, the value of the assets in the name of the community spouse is no longer a concern of Medicaid.


Medicaid-qualified annuities must have the following attributes:

  • Category: A single-premium immediate annuity (SPIA).  The premium is paid for in a lump-sum premium payment and the annuity immediately begins paying back the premium to the owner/annuitant.
  • Sold by company or bank in the business of selling annuities.
  • Irrevocable: The annuity is irrevocable and cannot be assigned to another party.
  • Life expectancy payout required: The annuity payments must be completed before the end of the annuitant’s life expectancy.
  • Equal Payments: The annuity payments must be equal throughout the annuity’s payment period with no deferral or balloon payments.
  • Medicaid named as primary or contingent beneficiary: The State of North Carolina’s Medicaid program must be named primary beneficiary, unless  the following persons are named primary beneficiary, in which case Medicaid is named contingent beneficiary:
    • The community spouse (spouse at home);
    • A child under 21; or
    • A disabled child of any age.

When properly used, a Medicaid annuity may help a Medicaid applicant preserve valuable assets for his or her family.