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How A Single Person Can Have $100,000 or more in assets and still qualify for Medicaid…

Pearl Williams, age 77, has lived in St. Louis, Missouri since the mid-fifties.  She remembers JFK’s Inaugural Address (“Ask not what your country can do for you….”), Watergate (“I’m not a crook”), Charles and Diana (“The Fairytale Wedding”) and empty promises (“Read my lips…no new taxes”).

She also remembers how she and her late husband Wally scrimped and saved so they’d have something to pass on to their children.

And they were good savers.  They managed to save nearly $100,000…all in CDs and savings bonds…before Wally’s death.  But now it’s all at risk. 

Pearl has just learned that she needs care in a nursing home, and with her modest income of $582 per month in social security, and with the nursing home cost of $3,200 per month, she knows her life’s savings won’t last long.  She feels like she has let Wally down…like everything they worked for will soon be gone.

You have good news for her.  You explained that she could turn assets (i.e., her CDs and savings bonds) into an income stream and qualify for Medicaid without spending down.

You explain that she can purchase an annuity to accomplish this.  Here’s how it works...

Pearl would purchase an annuity through an insurance company.  The company would agree to pay Pearl an income for as long as she lives. In order to meet the Medicaid rules and regulations, the annuity must be irrevocable and must be payable over Pearl’s life expectancy. Her life expectancy is based on tables issued by the Health Care Financing Administration (HCFA).

For instance, since Pearl is age 77, according to the tables found in HCFA Transmittal Number 64, the annuity must be designed to pay Pearl a monthly income for at least the next 10 years.  Depending upon the company used, as well as interest rates at the time, a $100,000 annuity payable over 10 years might pay Pearl about $825 per month for her life time.  These payments would be income to Pearl and could be used to offset the cost of the nursing home.  Once the annuity has been issued, Pearl can apply for Medicaid and Medicaid will pay the cost of the nursing home.

Recall that the annuity will pay Pearl a monthly income for the next 10 years.  If Pearl passes away after 3 years, slightly more than the average length of stay in a nursing home, the annuity will continue to pay the monthly income to her beneficiaries for the remainder of Pearl’s life expectancy.  In other words, in this case, the annuity would pay Pearl for the first 3 years and would pay her children for the next 7 years.

The bottom line is Pearl will have qualified for Medicaid immediately and passed on 70% of her estate to her children.

She is relieved.  You’ve shown her how she can qualify for Medicaid, receive the care that she needs and still save the bulk of what she and Wally spent a lifetime building.

The SSHEL Report:  Is published as a public service by the Rice Law Firm, L.L.C. which is dedicated to serving the needs of older and disabled individuals and their families.