In Michigan, many people hear the phrase “medicaid friendly” associated with their annuities. But what does this mean?
For starters, annuities are legally binding written contracts that you form with an insurance company. Said contracts stipulate that insurance companies will receive regular payments for a set number of years, or for the duration of your time as the contract holder. In exchange for giving the insurance company money, you receive the payments back later in the form of income. This essentially works as a way to get income and defer income taxes.
With Michigan based medicaid attorneys you can get answers to your specific legal questions, especially if you are considering an annuity, or you are wanting advice on Medicaid regulations.
That being said, for Michigan residents as a whole, the Medicaid regulations do not have any form of “medicaid friendly” annuity for their nursing home program or their Choice Waiver home based program. Those same regulations do stipulate how annuities are to be structured so that you, as a senior, can qualify for Medicaid. This makes the annuity Medicaid compliant.
With the current state regulations, annuities are either an asset or they are an income stream. If you can, based on the terms of your contract, liquidate your annuity in exchange for a lump sum payment from your income company, then the annuity is considered an asset and it counts toward the asset limit for Medicaid of $2,000.
However, if you as the senior only have the right to receive your annuity as an income payment, it is considered an income stream. There are, however, some extra strings attached. It is only an income stream if:
- It is irrevocable, meaning you have given up your right to cancel it.
- The contract was issued by an insurance company licensed to operate within the United States, and by an agent licensed to operate in the State of Michigan.
- The annuity payment is only for the benefit of the individual applying for Medicaid, or their spouse.
- The annuity is actuarially sound, meaning the money paid to your insurance company was paid back to you within your life expectancy.
- The payments are in equal amounts.
Clearly, annuities are never really Medicaid friendly. They are either income or they go toward the asset limit. However, each case is different. But, with a medicaid attorney based in the metro Detroit area, you can get solutions specific to your situation and determine how to better plan for Medicaid with annuities.
Determining where your existing contract falls, or preparing ahead of time to make sure a future contract falls within proper limits for income or assets, requires professional assistance.
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If you need legal help with a medicaid compliant annuity Michigan attorneys can help. We know the ins and outs of the law, changes therein, and the importance of maintaining proper compliance before it is too late. If you have any questions about Medicaid planning with annuities, call us to arrange your free consultation.