Disclaimer: With Medicaid, VA, and insurance regulations frequently changing, past blog posts may not be presently accurate or relevant. Please contact our office for information on current planning strategies, tips, and how-to's.
If you are new to Medicaid planning or just starting to incorporate Medicaid Compliant Annuities into your practice, the amount of information you are expected to take in can seem a bit overwhelming. That’s why we wanted to consolidate the top ten questions we receive most frequently in the hopes of answering some of the same questions you may have. These commonly asked questions help shed some light on the logistics of purchasing the Medicaid Compliant Annuity, the structural requirements of the annuity, and how our office can help to ensure the process runs smoothly.
#10 – What is a Medicaid Compliant Annuity?
A Medicaid Compliant Annuity (MCA) is a spend-down tool that can be used to help your senior clients accelerate their eligibility for Medicaid benefits. This single premium immediate annuity can be used as a crisis Medicaid planning tool to convert the applicant’s excess countable assets into an income stream. In order for the annuity to be classified as ‘Medicaid compliant,’ it must follow the structure requirements outlined in the Deficit Reduction Act of 2005.
#9 – What is the minimum premium amount for an MCA?
In most cases, the minimum investment amount is $5,000. Our office does work with a handful of insurance carriers to provide this annuity and each carrier can dictate their preferred limitations on the structure requirements of the annuity.
#8 – What is the minimum term for an MCA?
The minimum and maximum term for a Medicaid Compliant Annuity can be dictated by the insurance carrier. In some states where the term ‘actuarially sound’ is strictly defined, the minimum term requirement may be different as well. Although it may vary based on the insurance carrier available in your state, the minimum term for an annuity purchased through our office is two months.
#7 – What happens if the owner of the annuity predeceases the term?
If the annuitant should predecease the annuity term the remaining proceeds will be distributed to the named beneficiaries. In most instances, the primary beneficiary of the annuity is the state Medicaid agency. As such, the state Medicaid agency could recover the remaining proceeds of the annuity up to the amount of benefits they have expended on the institutionalized individual’s behalf. Any proceeds that are remaining in the annuity following the state Medicaid agency’s reimbursement will be distributed to the named contingent beneficiary(ies)
#6 – Is the State Medicaid agency required to be named as the beneficiary of the annuity?
In most states, the state Medicaid agency must be named as the primary beneficiary of the annuity in order for it to be classified as ‘Medicaid compliant.’ Typically, the Department can only be named as the remainder beneficiary in the second position if a Community Spouse or minor or disabled child is named as the primary beneficiary.
#5 – Can my client rollover their existing IRA into a Medicaid Compliant Annuity?
If your client resides in a state where their IRA is a non-exempt asset, they can roll over their existing IRA into a Medicaid Compliant Annuity. By doing so, the applicant is able to avoid the immediate tax consequences of liquidating the IRA and instead can spread the tax consequences over the annuity term. This can be accomplished through either a 60-Day Rollover or a Trustee-to-Trustee transfer.
#4 – What information is needed in order to obtain a quote?
Information such as your client’s gross monthly income, cost of care, and total available assets will need to be provided. Additional information such as your client’s marital status, state of residence, and date of birth may also be requested. Once received, your client’s information will be reviewed by one of our highly skilled Benefits Planners who will compose a customized plan for your client utilizing the Medicaid Compliant Annuity. The proposal will illustrate a recommended term and investment amount for the annuity as well as the economic benefits the client can expect, should they wish to proceed. Because we know how critical timeliness can be during these crisis plans, you can expect to receive a comprehensive proposal from one of our team members within one business day of providing our office with your client’s financial information.
#3 – Does Krause Financial Services work directly with the client to complete the purchase?
While our office does specialize in products associated with elder law, our team members are unable to provide any legal advice. As such, we do strongly encourage clients to work with an elder law attorney to purchase the annuity. While we are happy to help answer any questions your client may have about the annuity and how it works, we do prefer that the elder law attorney be the primary point of contact between our office and the client.
#2 – What is the reason for the processing fees associated with purchasing an MCA through Krause Financial Services?
Processing fees are only applicable to annuities with a term length of fewer than 48 months and can be either a flat rate or a percentage-based fee, depending on the premium amount. Many of our services such as our comprehensive proposals, case advising, application review, and expedited processing are all complimentary and nonobligatory should your client choose not to proceed. Should your client receive a denial as a result of the annuity, our in-house counsel is available to assist you through the fair hearing process without you or your client incurring an additional fee from our office. Additionally, many of our products such as funeral expense trusts, whole life insurance policies, and tax-deferred annuities do not require a fee at all.
#1 – How do I begin a case with your office?
When you are ready to submit your first Medicaid crisis case or simply have a client you think could benefit from a Medicaid Compliant Annuity, but aren’t quite sure, just contact our office! You can submit your client’s case facts by either calling our office, reaching out via email, or submitting a request through our online quote request portal.