Immediate Annuities: Medicaid Planning for Married Couples

Immediate annuities are used as a means for

Douglas L. Kaune, Esq.

preserving assets for spouses of nursing home residents. An immediate annuity is an investment whereby an individual pays a lump sum to an insurance company in return for a guaranteed monthly payment for the balance of his or her lifetime. In Pennsylvania (PA) the purchase of an “actuarially sound” annuity is not a gift when considering Medicaid qualification. This purchase is viewed as an investment and therefore does not cause any disqualification. Our clients are guided to use the immediate annuity in a way that will change an asset from being available for nursing home spending to an income stream for the community spouse. This often provides the community spouse a substantially greater income flow that increases comfort and standard of living. Here is a link to a PA case, James v. Richman (U.S. Dist. Ct., M.D. of Penn., No. 3:05-2647, Nov. 21, 2006) that makes clear that properly structured immediate annuities will be valid planning options in PA.

The following standard must be met in order for the immediate annuity to be considered a qualifying purchase: (a) It must be irrevocable. (b) You must be guaranteed at least what you paid into the annuity over the balance of your life expectancy. (c) If you purchase an annuity with a term certain, it must be shorter than your actuarial life expectancy. (d) The state must be named the remainder beneficiary up to the amount of Medicaid paid.

For questions or to review Elder Law and Estate Planning opportunities please contact Douglas Kaune, Esq. at 610 933 8069 or at
Doug is a member of the National Academy of Elder Law Attorneys (NAELA) and a Partner with Unruh, Turner, Burke & Frees, P.C. which is a full service law firm with offices located in Malvern, Phoenixville and West Chester, PA and also serving clients in the counties of Chester, Montgomery, Delaware, Bucks, Berks and Philadelphia.