Deficit Reduction Act Update
Dear Colleague:
As I explained in my Winter 2008 newsletter, the Deficit Reduction Act has been implemented in Michigan. I highlighted the many changes in Medicaid eligibility as a result of this new law. I would like to clarify the requirements as to the use of an annuity.
An annuity will allow person to reduce their countable assets by creating an irrevocable income stream. Prior to February 8, 2006, the requirements for an annuity was that it had to be "actuarially sound." This required that the annuity be paid over a guaranteed number of years, however, not longer than the annuitant's life expectancy.
In addition to being "actuarially sound," an annuity purchased or amended on or after February 8, 2006, must name the State of Michigan as either the primary or secondary beneficiary, for an amount at least equal to the amount of the Medicaid benefits provided. The Department has indicated that an annuity owned prior to February 8, 2006, and annuitized for Medicaid purposes, is "amended" and would require the above beneficiary changes.
As this new law continues to be implemented, it is important for applicants to determine whether an annuity is an appropriate planning tool. Other alternatives for spending down may provide better protection. It is important that clients seek counsel to discuss the use of annuities if Medicaid may be needed to assist with paying for long term care.
Smith Bovill, P.C. counsels clients on elder law, Medicaid, and SSI planning issues regularly as part of its estate planning, probate, and trust administration practice. This letter, as well as all prior letters, are posted on our web site at www.smithbovill.com. Please check our web site for any updates to the newsletters and additional information regarding elder law. This letter and the information on our web site, is intended to be for informational purposes only. As a result of the constantly changing laws in the Medicaid area, the information provided may change. We would be pleased to discuss this, or any other Medicaid or elder law issues, in more detail.
SMITH BOVILL, P.C.
