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Medi-Cal Planning with Annuities

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The prospect of your spouse entering a nursing home for long-term care can be daunting, especially with all of the logistical issues and care coordination concerns that accompany such a move. Financial planning for Medi-Cal eligibility can add more stress, since there are strict asset and income limits that must be adhered to by both the spouse in need of care and the healthy spouse, otherwise known as the well spouse, in order to receive the benefits. One way couples plan for Medi-Cal eligibility is through the use of annuities.

The basic premise of this strategy relies on two facts:

  1. A large amount of cash can be used to purchase an annuity, which guarantees future payments in the form of income over a person’s lifetime,
  2. While the spouse in need of long-term care must follow strict income and asset limits, the well spouse is only held to an asset limit, with no cap on the amount of income the well spouse can bring in.

So, the simple explanation would be that the spouse in need of care would purchase an annuity with their own assets to be used as income for the well spouse. However, like everything else with about Medi-Cal eligibility, planning with annuities isn’t that simple. For instance, the annuity payments must be made in total before the end of the well spouse’s life expectancy, and the state must be named as the primary beneficiary of the annuity after the well spouse. This ensures that the remainder of the annuity payments go back to the state to repay the Medi-Cal benefits. In addition, the annuity must be purchased commercially, meaning that a private annuity agreement between family members would disqualify an applicant from Medi-Cal eligibility.

There are several other rules and regulations regarding planning for Medi-Cal coverage with annuities, including transfer, revocation, the term of payments in regards to the life expectancy of the well spouse, and the amount of money in each monthly annuity payment. It’s best to consult with a Los Angeles County elder law attorney who has experience working with annuities to successfully plan for Medi-Cal coverage.

If you would like to learn more about Medi-Cal eligibility planning through the use of annuities, or if you’d like to discuss different ways to plan for Medi-Cal eligibility for the future, please set up an appointment at our Los Angeles County elder law office by calling (818) 905-6088.

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