Medicaid Planning - "Irrevocable Annuity Trusts"
Our Winter, 2005, Newsletter stated that the state Medicaid laws had been changed to provide that Section 529 College Savings Plans would be an excluded asset.
When the Michigan Department of Human Services (DHS) published the latest updates to its Program Eligibility Manual (PEM) it clarified that this ruling was limited to specific DHS programs such as State Disability Assistance and Family Independence Program. Currently this change does not provide an exemption for 529 plans for SSI-Related Medicaid applicants or Nursing Home Medicaid applicants.
For a Medicaid application, this would still be a countable asset to the owner. The asset has a cash value to the owner. While these plans allow the owner to change the beneficiary of the funds, the specific plan would need to be reviewed to determine whether is is permissible to change ownership. If a change in ownership were permitted, under current laws the transferring of such an asset would be a divestment and subject to a penalty. If a change in ownership were not permitted, the accounts would need to be closed. This would result in a tax consequence to the owner.
It is important that the assets of a medicaid applicant, including 529 Plans, be carefully reviewed so that the appropriate Medicaid planning decisions can be made.
Smith Bovill, P.C. counsels clients on elder law and Medicaid 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 newsletter 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.
| ANDREW D. RICHARDS | SHARON A. BURGESS |
| SMITH BOVILL, P.C. | SMITH BOVILL, P.C. |
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