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Philadelphia PA Estate Planning Blog

Monday, September 21, 2015

Medicaid and Immediate Annuities

Immediate annuities are advanced planning tools used by elder law and asset protection attorneys to assist married nursing home residents qualify for Medicaid (called Medical Assistance or MA in Pennsylvania) coverage while making sure the healthy spouse has sufficient income, and also to help preserve a portion of the estate for the families of unmarried or widowed nursing home residents.

Immediate annuities can help Medicaid applicants in two ways: 

First, many spouses of nursing home residents face a dramatic reduction in income when the “community spouse” (spouse going into the nursing home) qualifies for Medicaid.  Purchasing an immediate annuity can convert assets needing to be spent down into an income stream for the healthy spouse while avoiding a penalty for transferring assets.  

Next, a community spouse can purchase an annuity that will provide income to pay the nursing home while waiting out the Medicaid five-year look-back period caused by gifting.  Often, these latter annuities are of short duration – only as long as the penalty period.

But some states, including Pennsylvania, have maintained that short-term annuities – usually two years or less – are still subject to a transfer penalty.  This will change now that the Third Circuit Court of Appeals has ruled that Medicaid officials must accept applicants' short-term annuities, and that these types of annuities cannot be counted as resources and be made subject to penalty. Zahner v. Secretary Pennsylvania Dept. of Human Services (3rd Cir., Nos. 14-1328, 14-1406, Sept. 2, 2015).  

While the decision provides more certainty, immediate annuities must still meet a number of stringent requirements, including being actuarily sound, to be accepted as legitimate by County Assistance Offices in Pennsylvania.  Families considering them should get help from a qualified elder law attorney in the state where you are a resident. You should never attempt to purchase an immediate annuity for Medicaid planning yourself without a comprehensive Medicaid Plan by a qualified attorney.

If you are healthy and have the ability to plan in advance of long-term care needs, the use of a Medicaid Asset Protection Trust or long-term care insurance products (or hybrid life insurance products) may be options to help preserve assets without resorting to the use of immediate annuities.


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The Law Offices of Jeremy A. Wechsler assist clients with Estate Planning matters in Willow Grove, PA as well as Abington, Hatboro, Dresher, Horsham, Bryn Athyn, Huntingdon Valley, Fort Washington, Jenkintown, Glenside, Oreland, Warminister, Wyncote, Ambler, Elkins Park, Flourtown, Philadelphia, Warrington, Cheltenham, Gwynedd Valley, Jamison, Feasterville Trevose, Richboro, North Wales, Blue Bell, Lafayette Hill, King of Prussia, Collegeville, Oaks, Phoenixville, Oxford Valley, Langhorne, Penndel, Bristol, Fairless Hills, Bensalem, Plymouth Meeting, Furlong, Philadelphia County, Bucks County and Montgomery County.

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