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Paying for Long Term Care:
A Medicaid Spousal Annuity

Marks Elder Law Michael H. Marks, Esq.

Michael H. Marks

Linda Law Carroll


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This strategy is for married couples when one spouse needs nursing-level care, only, based on Medicaid rules. Please refer to the separate text titled “Medicaid – Basic Rules: Married Couples,” for these rules.

The Medicaid Qualified Spousal Immediate Annuity strategy allows a married couple to shelter assets when one spouse is applying for Medicaid for nursing care by utilizing the provisions that protect the “community spouse” (the other spouse who is not ill and is still living at home in the community) from financial ruin.

The strategy works by converting your excess assets seen as belonging to the ill, institutional spouse, into monthly income belonging to the community spouse instead. You can convert your remaining assets into a series of monthly income payments for the spouse remaining at home, and keep the annuity payment funds as you receive them. Funds that are returned to the community spouse through the annuity are generally safe and protected, and do not need to be spent on the ill spouse’s cost of care.

This income is NOT counted towards the Medicaid asset levels. Assuming you meet other eligibility requirements, Medicaid will begin to pay for your ill spouse’s care immediately.

You can choose the duration or term of the annuity, and it can be short. You can receive back all the funds that you invested into the annuity within a matter of months.

Annuity Definition

An “annuity” is like a combination of an investment and an insurance policy. The “annuitant” is the equivalent of the “insured” in an insurance policy. When the annuitant dies, a death benefit is payable to a named beneficiary.

An “immediate annuity” is one that immediately begins to generate a stream of monthly income payments.

A “Medicaid qualified” a annuity is one that has level payments with no balloon payment at the end, and is not assignable and is irrevocable. In addition, it must be for a term which is less than the statistical life expectancy of the annuitant, i.e. the community spouse, but it can also be for a much shorter term. During the term of the annuity, the community spouse will typically have a temporarily elevated monthly income.


One disadvantage is that you have to name Medicaid as the primary beneficiary for the death benefit if the community spouse annuitant dies during the term of the annuity, to the extent of the benefits that Medicaid has paid for the ill, nursing home spouse. (If that should occur early in the term of the annuity, then Medicaid won’t have paid out much in total benefits, and more of the death benefit will be left for your family.. If that should occur near the end of the annuity term, then there won’t be much value left in the annuity to go to Medicaid anyway.) You can name your family or other beneficiaries to get the remainder of the death benefit

Another disadvantage is that this strategy often requires you to liquidate existing resources in order to have cash to use to purchase the new annuity. However as the community spouse, you can keep and reinvest the additional income that you receive each month. Also, the annuity will produce only minimal interest, as its purpose is to protect the principal, not to produce investment returns or growth as with other investments. Finally, purchasing annuities of this type for smaller amounts or for a shorter term can require paying administrative fees.

Call today to meet with an elder law attorney in Pittsburgh, with offices in Monroeville. Contact Marks Elder Law today to start the planning process.

We will gladly review your planning for long term care to ensure it is up-to-date.