New Case Supports Medicaid Annuity Planning

Posted on: April 26th, 2012 by Lawrence A. Friedman

To qualify husband or wife for Medicaid, a couple must reduce [“spend down” in Medicaid parlance] money and most other valuables (not counting principal residence, a vehicle, and certain jewelry) owned by either spouse to the smaller of about $110,000 or half the total countable assets of husband and wife. However, rather than spend down all excess resources for long term care, families often can protect excess resources through various Medicaid planning techniques discussed in greater detail in the articles and practice area tabs of [CAUTION- because Medicaid planning is complex and often counter-intuitive, do it yourself Medicaid planning can waste opportunities to save assets and delay the start of Medicaid.]

Medicaid qualified annuities are sometimes used to preserve excess resources by providing additional income to a spouse who doesn’t need long term care. However, annuity planning is not the best approach for all situations and isn’t favored by some Medicaid administrators. Nevertheless, a recent ruling from North Dakota lends support to Medicaid annuity planning.

In Geston v. Olson (U.S. Dist. Ct. N.D., No. 1:11-cv-044, April 24, 2012), the United States District Court for the District of North Dakota, Southwestern Division precludes the state from limiting the size of permissible annuities. In discussing Medicaid annuity planning, the Court says, “If there is a ‘loophole’ under federal law as to the treatment of irrevocable and nonassignable annuities under the Medicaid program, “the closing of that ‘loophole’ is best left for Congress to address.”

While a United States District Court ruling from North Dakota isn’t binding in New Jersey or New York, the Court’s logic accords with various similar rulings in other states. Thus, it may prove persuasive toward supporting Medicaid annuity planning outside North Dakota, which bodes well for families that employ Medicaid planning annuities in our area.

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