As we’ve discussed previously on this blog, the cost of nursing home and other long-term care can be exorbitant. If you don’t plan to effectively cover these costs, then your assets can quickly dissolve, leaving you with very little, if anything, to distribute to your loved ones upon your passing.
If you’ve looked at MassHealth planning options in the past, then you might be concerned about your ability to meet eligibility requirements. After all, many Massachusetts residents don’t act in time to comply with the state’s five-year lookback period, meaning they are subject to financial penalties when they apply for MassHealth.
If you need immediate financial assistance to cover your long-term care needs, there may be options that protect your assets and shield you from penalties. One of the most effective is an immediate annuity.
What to know about the use of immediate annuities for MassHealth planning purposes
With an immediate annuity, you pay a lump sum in exchange for an ongoing revenue stream in the form of monthly payments. This not only ensures that you have consistent monthly income, but it also reduces your countable assets for MassHealth eligibility purposes so long as the annuity is deemed to be actuarially sound. This means that the annuity must guarantee payments to the recipient for a period of time that doesn’t exceed their actuarial life expectancy, and the annuity’s anticipated payments must be equal to or greater than the cost of purchasing the annuity.
It’s important to note that the state must be named as a beneficiary on the annuity so that if you pass away before the term of the annuity expires, the state will have the ability to claim those payments up to the amount of MassHealth benefits used to cover your care expenses. Any remaining annuity payments after that point can be disbursed to other named beneficiaries. So, even though some of your upfront annuity payments will likely be utilized to pay for your long-term care, securing one of these annuities can ensure that your long-term care needs are met and, perhaps, that you’ll have money left over to leave to your loved ones.
Are there disadvantages to using an immediate annuity?
As with all investment options, there are some risks associated with an immediate annuity. While one of these annuities will simplify your investment, avoid market volatility and provide you with a consistent stream of income while helping you qualify for Medicaid, some people find themselves uncomfortable with losing access to the principal amount and facing low interest rates. But these disadvantages can be minimal in light of the risks associated with having to find a way to cover your own nursing home or other long-term care costs.
Are there other options for MassHealth planning?
Yes. If you recognize the potential need for long-term care early enough, then you can engage in lifetime giving and other forms of wealth transfer, such as the utilization of certain types of trusts, to reduce your countable assets to meet MassHealth eligibility requirements. But with the lookback period in place, you’ll need to start building your plan sooner rather than later.
Develop the Medicaid planning strategy needed to protect your interests
Medicaid/MassHealth planning can be more complicated than expected, which is why now is a good time to educate yourself on the process as much as possible, that way you can make fully informed decisions that are right for you. If you’d like to learn more about what effective Medicaid planning looks like, then we encourage you to continue reading our blog for other ideas to protect your interests.