Gene E. Utterback, EA" <eagent[at]alliancetax.com> wrote:

- quote -

Thanks - my obvious problem was a misunderstanding of
Medicaid.

I have always thought that if the applicant failed the
Medicaid income test ($2000 of annuity income - before
considering Social Security - fails the income test in my
State), they would not be entitled to *any* Medicaid money.
True, I was aware that Medicaid would "take" any income
(like Social Security), but the applicant first had to meet
the income test before Medicaid even entered the picture.

I need to do some additional reading.

-HW "Skip" Weldon
Columbia, SC

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Gene E. Utterback, EA wrote:
- quote -

This works in California, i.e., the annuity would not be a
countable asset for Medi-Cal eligibility, as long as the
annuity is irrevocable, it is making periodic payments of
interest and principal, and the contract term does not
exceed the Medi-Cal applicant's life expectancy using the
SSA actuarial tables.

At the current time, CA estate recovery (sometimes called a
Medi-Cal Lien) for Medi-Cal benefits does not include
annuities, life insurance or retirement accounts that go to
a designated beneficiary. However, I don't believe there is
anything in the way the law is written that would prevent CA
from adopting a new set of rules and regulations if it so
desired.

--
Alan
http://taxtopics.net

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"HW "Skip" Weldon" <skip5700removethis[at]hotmail.com> wrote:

- quote -

Yes, it would get included in income, but so what - let me
explain.

If you have a mutual fund portfolio worth $250,000 and go
into a nursing home, Medicaid will expect you to spend down
the $500,000 before they pay. So you pay $5,000 per month
our of your mutual fund portfolio to cover the nursing home
costs and the money will last about 50 months, just over 4
years - at which time you die with nothing left in your
mutual fund portfolio.

Now assume you have an annuity worth $250,000 that is
generating monthly income of $2,000 per month, this will
provide an income stream for 125 months, or just over 10
years and Medicaid cannot make you accelerate this. The
nursing home still costs $5,000 per month. BUT they can
only take the income stream of $2,000 per month. Again,
assume you live 50 months and die. You have reduced the
annuity account value by $100,000 and the remaining $150,000
can pass outside the reach of Medicaid to your
beneficiaries.

Same dollars to start with, big difference in who gets what
in the end. I have or course ignored any rate of return on
either investment and made some assumptions. Actual results
will no doubt vary some, but the principal is correct. The
net result is that while you might bump up against the
income test, the annuity provides you the opportunity to
preserve some of the assets for beneficiaries.

Gene E. Utterback, EA

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Stuart Bronstein wrote:

- quote -

Still, it is my understanding that many states take a very
dim view of the "last minute" annuity, and they will take
whatever steps they can to burst the deal.

At the heart of the question, as I understand it, is whether
such annuity represents a (for lack of better term)
"commercially viable" arrangement or, rather, whether it is
cleverly crafted specifically to take advantage of Medicaid
rules (but doesn't otherwise make much sense as an annuity
or insurance policy). I suppose this is one of those "pigs
get fat, hogs get slaughtered" situations.

MTW

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- quote -

In my state Medicaid has both an asset test and an income
test.

If we removed the asset (for example, sold stocks and bonds
then bought an immediate annuity with the proceeds) from the
owner's net worth, would they not then bump into the income
test for Medicaid qualification?

-HW "Skip" Weldon
Columbia, SC

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"HW "Skip" Weldon" <skip5700removethis[at]hotmail.com> wrote:
- quote -


Without double checking, my memory tells me the look-back
rule DOES NOT come into play. However, as more and more
states come to this realization some are adopting their
rules to cope.

It would be prudent to check with someone local who is
familiar with your state's Medicaid rules before making any
significant moves.

Gene E. Utterback, EA

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HW "Skip" Weldon wrote:
- quote -

I would doubt it. My understanding is that it only applies
to what is given away, not to what is paid in exchange for
fair value.

Stu

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Gene E. Utterback, EA" <eagent[at]alliancetax.com> wrote:

- quote -

Does the 3-year look back period come into play here?

-HW "Skip" Weldon
Columbia, SC

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"Gary Goodman" <XgaryXg7X[at]yahoo.com> wrote:
- quote -

One of the things often overlooked by planners - tax,
estate, financial, Medicaid and otherwise - is the use of an
annuity as part of the planning process. Annuities are
unique in that ONLY the income stream produced by the
annuity goes to the nursing home. The unused principal will
pass directly to the beneficiaries and is untouchable by
Medicaid and the nursing homes. So, if you have an elderly
person with little need for large amounts of current income,
you could consider using an annuity to shield some of the
money from Medicaid.

Gene E. Utterback, EA

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Gary Goodman wrote:

- quote -

I, for one, am certainly supportive of trying to protect a
NOMINAL amount of assets to supplement what is covered by
Medicaid. In my state, for example, prescription drug
limitations have been a most notable problem.

However, many of the Medicaid questions we see posted around
here seem to deal far more with protecting assets for the
benefit of the HEIRS (in fact, THEY are the ones asking the
questions) rather than for the benefit of the individual.

MTW

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mtwingcpa[at]yahoo.com says...
- quote -

be very wealthy or completely broke in order to get nursing
care. About 12 years ago my sister and I had to look for a
nursing home for our mother in Charlotte, NC. At that time,
nursing homes cost from $40,000 to $50,000 a year. Once my
mother's money ran out, all Medicaid would let her keep a
month for personal items such as clothes, hair cuts,
para-transit, etc. was $30! (The amount varies by state.) We
had a Medicaid trust done that would allow her to qualify
for Medicaid in 30 months. (The qualification period has
changed since then.)

All we wanted to do was provide some extras for our mother
that would make her life better. The expense of a nursing
home could have bankrupted all of us, but creating a trust
would shelter enough to pay for her hair styling (it was
done in the nursing home for $15), a TV, clothes, etc.

As it turns out, my mother passed away before the end of the
30-month period, but her money was nearly depleted because
we chose to pay $300 a week for physical therapy to help her
get stronger. In her last full year of life, her medical
expenses were about $60,000 and her non- medical expenses
were about $7,000 above that. (We flew her and a nurse's
aide to NYC for a memorial service for my grandmother.)

The rules have been put in place by politicians. If you
don't like the rules, work to change them.

Gary

--
You can probably X figure out X which letters to X delete to derive my
email address X.

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Rich Carreiro wrote:

- quote -

I plead guilty to your hypocrisy charge.

However, I perceive a subtle distinction between complying
with a government obligation (paying taxes) and seeking a
need-based benefit (Medicaid). I realize this distinction is
thin, but I guess it has to do with the DIRECTION that the
money is flowing. In the case of taxation, the government
wants something from ME. In the case of Medicaid, I want
something from the GOVERNMENT. So, I don't feel too bad
about distinguishing between the two cases.

Perhaps as a teenager I was overly drugged by the immortal
words of JFK: "Ask not what your country can do for you; ask
what you can do for your country." But, if that doesn't make
my point, then consider (with no offense intended) this
age-old quotation: "Consistency is a paste jewel cherished
by a cheap mind." <g
Or, lastly, consider this recent quote from the "new" JFK:
"I'm not going to apologize because some of these problems
are complicated!" <g
MTW

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"MTW" <mtwingcpa[at]yahoo.com> writes:

- quote -

Most of the people I see here castigating the original
poster have posted over and over and over again about how
not only do they help their income tax clients arrange their
affairs to lower their income tax, but consider doing so to
be a responsibility of their (the income tax preparer's)
profession.

I smell more than just a whiff of hypocrisy from a lot of
the crowd.

If one claims that arranging one's affairs within the law to
reduce the amount of one's assets the government takes as
income taxes is A-OK, how does one simultaneously claim that
arranging one's affairs within the law to increase the
benefits the government gives one is wrong? I don't buy it.

I wonder if medicaid planning attorneys talk amongst each
other about how those income tax preparers are helping
clients rip off the taxpaying public. :-)

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

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Phil Marti wrote:

- quote -

I'll "second" that!

Also, I find it ironic that people who have money are so
darned eager to qualify for Medicaid. Perhaps they should
visit a couple of nursing homes and see if they find that
level of care to be appealing. And, of course, perhaps those
kids driving the SUV's should think about how THEY will
likely be treated by THEIR kids.

MTW

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Phil Marti wrote:
- quote -

Phil, I hear you, but when did I become responsible for
three generations? I don't have an SUV or aspire to one. My
father in law is dying of cancer and he asked me to counsel
my mother in law on some financial matters including this
issue. Were I involved long ago, I'd have recomended long
term care insurance, now I'm just trying to answer what I
thought were some legitimate questions. Next in line for the
money isn't my wife, but her sister, who, despite my advice,
is not a saver.

If the law is wrong, it should be changed, but I did think
the point of the forum is to discuss the laws as written,
not debate whether they are right or wrong. And to the other
poster who suggested this wasn't a 'tax' question, I suppose
not, but it does fall under the general topic of financial
planning and as a moderated board, Dick had the choice to
reject it.

JOE

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Phil Marti wrote:

- quote -

I'll "second" that!

Also, I find it ironic that people who have money are so
darned eager to qualify for Medicaid. Perhaps they should
visit a couple of nursing homes and see if they find that
level of care to be appealing. And, of course, perhaps those
kids driving the SUV's should think about how THEY will
likely be treated by THEIR kids.

MTW

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"A. G. Kalman" <glendale202-mtm[at]yahoo.com> writes:

- quote -

Well, I guess it depends on how one defines "wrong." I put
divesting oneself of assets specifically for the purpose of
having ME pay his nursing home expenses way beyond "wrong."
He, through our elected representatives, is picking my
pocket, and I don't care for it a bit.

I really wish they'd make the recipients of these funds put
bumper stickers on their luxury SUV's saying "My parents are
on welfare."

Phil Marti
Topeka, KS

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A. G. Kalman wrote:

- quote -

What I read into the post was an intent to preserve for
inheritance the assets of a potential nursing home patient
and to make her eligible for payment by taxpayer supported
Medicade.

I know that this - as well as gifting the assets - is
perfectly legal if done properly; and might be considered
good estate planning. However, I just don't think it is
right.

My mother spent her last eight years in nursing homes. After
her assets were depleted, my sister and I paid the
considerable freight over and above her relatvely modest SS
income. We did this because we could - and because we
thought it was the right thing to do.

Were we out of our minds to not let the taxpayers pay the
bills? Maybe. Are our consciences clean for not having done
so? You betcha. I realize that this is a strictly personal
decision. I would do it again.

Bill

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William Brenner wrote:

- quote -

I think you read more into this post than is actually there.
I have not come upon a single estate planner who has not
raised the issue of nursing home care and planning on how to
pay for it. There is nothing wrong with gifting away
countable assets during one's life. I see nothing wrong with
trying to educate oneself on the complex set of rules
surrounding Medicaid benefits.

--
Alan
http://taxtopics.net

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joetaxpayer[at]nospam.com" <joetaxpayer[at]nospam.com> wrote:

- quote -

www.seniorlaw.com/snt.com is a nice primer I think you'll
find useful. Some of the info is specific to NY, some is
generic. Be careful, and I hope your mother-in-law live to
100!

Rick Bryan
New York, NY


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