Nassau County Bar Association Annuities in an Elder Law Practice Vincent J. Russo, JD,LLM,CELA Vincent J. Russo & Associates, PC Westbury, Islandia, Woodbury and Lido Beach, NY www.vjrussolaw.com
Summary of What will be Covered Medicaid Treatment of Annuities Planning Strategies with Annuities / Promissory Notes as part of the Medicaid Plan Vincent J. Russo & Associates, PC Copyright 2010 2
Medicaid Treatment of Annuities Tax Deferred Annuities Annuities which have been annuitized Single Premium Immediate Annuities (SPIA) Vincent J. Russo & Associates, PC Copyright 2010 3
Medicaid Treatment of Annuities General Rules Available Resource Conversion to Income Stream Subject to the Medicaid Transfer Penalty Period Vincent J. Russo & Associates, PC Copyright 2010 4
Medicaid Treatment of Annuities - DRA Beneficiary Designation Annuity must be: Irrevocable and Non-Assignable Actuarially sound Equal Payments with no deferral or balloon payments Disclosure Vincent J. Russo & Associates, PC Copyright 2010 5
Medicaid Planning with Annuities for Clients in Crisis Gift and DRA Compliant Transaction Gift 50% to be protected Use 50% to pay for long term care through the purchase of an Annuity (Promissory Note) Benefits: Protects a portion of the Client s Assets Secures Income Stream to Pay the Nursing Home Utilize vehicles sanctioned by DRA Vincent J. Russo & Associates, PC Copyright 2010 6
Medicaid Planning with Annuities for Clients in Crisis Return of Assets Partial Gifts / Annuities (Promissory Note) Transfers caught within the Lookback Period No Planning in advance of the need for long term care in a nursing home Response to the abolishment of Rules of Halves Planning Vincent J. Russo & Associates, PC Copyright 2010 7
Medicaid Planning with Annuities for Clients not in Crisis Transfer of Annuities to Family Members Transfer of Annuities to Medicaid Asset Protection Trust Vincent J. Russo & Associates, PC Copyright 2010 8
Medicaid Transfer Penalty Rule Amount Transferred divided by the Monthly Regional Rate of Nursing Home Care 2010 NYS Rates $7,264 to $11,227 New York City $ 10,285 Westchester $ 10,163 Nassau/Suffolk $ 11,227 9
Medicaid Transfer Penalty Post DRA Penalty - Medicaid ineligible for Nursing Home Care (Based upon a $10,000 regional rate).... 10/15/10 11/1/10 4/30/13 9/30/15 Gift Penalty Penalty Lookback $300,000 Begins Expires Expires Note: Calculation of the penalty period: $300,000 divided by $10,000 Note: The penalty commences on 11/1/10 when residing in a nursing home, files for Medicaid and is otherwise Medicaid eligible 10
Medicaid Spousal Allowances Community Spouse Resource Allowance $74,820 - $109,560* plus homestead in New York Community Spouse Income Allowance $2,739* per month in New York Spousal Refusal *Above Amounts will vary depending upon State law Vincent J. Russo & Associates, PC Copyright 2010 11
Spousal Planning with Annuities Conversion of assets in excess of the CSRA prior to Medicaid application post filing of the Medicaid application Vincent J. Russo & Associates, PC Copyright 2010 12
The Crisis Sam, age 76, has suffered a stroke and needs nursing home care 13
Sam is in Need of Nursing Home Care Did Sam do any planning prior to the crisis? Does Sam have the Capacity to act? Does Sam have a DPOA with gifting provisions? Statutory Durable Power of Attorney Effective: 9/12/2010 Prior Statute: 9/01/09 9/11/10 Guardianship Court ordered Medicaid Planning 14
Sam is in Need of Nursing Home Care (#1) Sam is 76 years old Sam has the following assets: $300,000 in bank accounts Sam has monthly income of $3,000 Nursing home monthly cost: $15,000 15
MEDICAID NURSING HOME CARE Post DRA (2/8/06 and thereafter) 60 Month Look Back Period* For outright transfers. Date of Filing For Medicaid For transfers to/from certain Trusts. Date of Filing For Medicaid * For outright transfers, 56 months as of Oct. 2010, increasing one month each month until 60 months 16
Medicaid Transfer Penalty Calculation Post DRA Start Date of the Transfer Upon the occurrence of the following: MA residing in the nursing home Otherwise Medicaid Eligible but for the transfers Files a Medicaid Application 17
Sam is in Need of Nursing Home Care (#1): Solution Gift a Portion of the Assets Loan a portion of the Assets or Purchase a Single Premium Immediate Annuity (SPIA) File a Medicaid Application Use the loan proceeds and the individual's assets to pay for nursing home care during the penalty period Seek Medicaid after the loan proceeds are depleted 18
Sam is in Need of Nursing Home Care (#1): Solution Amount Spent on Nursing Home Care: $140,249 from assets (approximately) Plus: monthly income of $3,000 Assets Protected under this Strategy: $145,951 (approximately) Plus: resource allowance of $13,800 Less: interest on note of $4,124.61 19
Sam is in Need of Nursing Home Care (#2) IRAs under Medicaid General Rule: Available Asset Exception: IRA is in Permanent Pay Status Then, Income Stream and not an Asset for Medicaid Eligibility 21
Sam is in Need of Nursing Home Care (#2): Solution Amount Spent on Nursing Home Care: $124,485 from assets (approximately) Plus: monthly income of $5,527.81 Assets Protected under this Strategy: $161,715 (approximately) Plus: resource allowance of $13,800 Plus: remaining IRA to named beneficiary Less: interest on note of $3,925.21(approximately) 22
Sam is in Need of Nursing Home Care (#3) Sam, age 76, has the following assets: Liquid Assets worth $600,000 $300,000 in Bank Accounts $300,000 in IRA accounts Home worth $600,000 23
Sam is in Need of Nursing Home Care (#3): Solution Amount Spent on Nursing Home Care: $213,302 (approximately) Plus: monthly income of $3,000 Assets Protected under this Strategy: Residence worth $600,000 if not sold during Sam s lifetime Plus: $72,898 in cash gifts Plus: $13,800 resource allowance Less: interest on note ($8,998.42) 24
Sam is in Need of Nursing Home Care (#4) Sam is Married to Jane Sam and Jane have the following assets: Liquid Assets worth $600,000 $300,000 in Bank Accounts $300,000 in IRA accounts (Owner: Sam) Home worth $600,000 Sam and Jane have the following income: Sam: monthly fixed income of $2,000 Jane: monthly fixed income of $1,000 25
Medicaid Spousal Allowance and Refusal in NYS Community Spouse Resource Allowance $74,820 - $109,560 plus homestead Community Spouse Income Allowance $2,739 per month Allowances vary State by State using Federal Guidelines Maximum Allowance Amounts are subject to annual adjustment 26
Sam is in Need of Nursing Home Care (#4): Solution Step One: Transfer assets from ill spouse to Community spouse Step Two: Prepare and file Medicaid Application for the ill spouse with Spousal Refusal Step Three: Post Medicaid Eligibility Planning 27
Summary Medicaid Treatment of Annuities Planning Strategies with Annuities / Promissory Notes as part of the Medicaid Plan Vincent J. Russo & Associates, PC Copyright 2010 28
Nassau County Bar Association Annuities in an Elder Law Practice WOW- Make A Difference! Have a Great Day! Vincent J. Russo, JD,LLM,CELA www.vjrussolaw.com 29