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In March of 2010 the National Association of State Medicaid Directors ("NASMD") wrote a letter to the Center for Medicaid and State Operations ("CMS") regarding the inappropriate use of short-term Medicaid Compliant Annuities. If you recall, NASMD requested that CMS take the position that a Medicaid Compliant Annuity purchased by a community spouse "should be treated as a trust-like device, and that the entire amount used to purchase the [Medicaid Compliant Annuity] should be counted in determining Medicaid eligibility." If you have not read the letter, you may find a copy of it here. Immediately after reading the letter, I reached out to all the elder law attorneys I know that utilize short-term Medicaid Compliant Annuities int heir practices. It has always been my opinion that a community spouse's Medicaid Compliant Annuity should not be so short as to create an unreasonable amount of monthly income. The total monthly income received by the community spouse should be reasonable in light of his or her current and future financial needs. The fear was that aggressively short Medicaid Compliant Annuity planning techniques in spousal cases would catch the attention of state Medicaid agencies, which is what appears to have happened back in March of 2010. The purpose of reaching out to elder law attorneys was to create awareness of the situation at hand, and hopefully deter the inappropriate use of short-term Medicaid Compliant Annuities in spousal situations. However, it seems as though since that time their use has become even more popular. Situations exist wherein a short-term Medicaid Compliant Annuity is completely appropriate, such as to provide a community spouse with reasonable monthly income to maintain his or her standard of living. However, their use is most commonly seen in individual gifting plans that include a small spend-down amount. I am of the opinion that it is not appropriate to utilize a short-term Medicaid Compliant Annuity in a spousal case where the couple has a very high net worth, resulting in the community spouse receiving $80,000+ in monthly income. The purpose of this blog post is not to inform you, as an elder law attorney, that you cannot implement this type of planning, but rather to bring this matter to your attention and create awareness. I feel that it may be in the best interest of all practitioners to follow a more conservative approach in future community spouse planning scenarios that involve Medicaid Compliant Annuities. It is the goal of Krause Financial Services to protect short-term Medicaid Compliant Annuities, and ensure that they are available to utilize in the appropriate planning scenarios for years to come.
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Medicaid, annuity, annuities, short-term annuity,
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