"Annuities"

Nearly half of all long term care costs are paid for by privately owned assets. All too often, these assets represent the "life savings" of our clients, either in the form of a business or in their retirement plans. With long term care costs exceeding $50,000 annually and the Medicaid program becoming more restrictive, the door is open to a number of "new" sales opportunities for long term care insurance and annuities.

Annuities have been around as a financial tool and medicaid planning option for a number of years. The government has recognized that under some circumstances, assets which are captured in the form of an "annuity" are not "countable" assets for Medicaid qualification purposes.

The term "annuity", however, can be deceptive, and can mean different things to different people. For our purposes, it is most important to understand what the term "annuity" means to the Michigan Family Independence Agency (FIA). They are governed by the U. S. Social Security Laws and by their own Program Eligibility Manual (PEM). In order for the annuity to "work" in their eyes, the annuity must meet their actuarial requirements and fit within the terms of the PEM and the federal law.

A real concern is that many purveyors of annuities do not understand these rules and yet tell clients that "Medicaid Asset Protection" is simply a matter of converting all (or nearly all) their assets into an annuity. Often these annuities do not meet FIA requirements and do not provide the promised "Medicaid Asset Protection." Added to this is the problem of the stiff withdrawal penalties within the first years of the annuity.

A second real concern is that an "annuity" approach may not be the best approach for the client. There is simply no "one-size-fits-all" approach, that will work for every client. Unfortunately, this concept is often sold exactly that way. The annuity creates an immediate stream of income which may or may not be of benefit to the client. Often clients are convinced to convert assets which may have been subject to other-better-planning methods to protect them.

There are clearly situations where properly structured annuities are extremely useful to our clients-notably in the area of qualified retirement plan assets. It is important, however, that qualified advisors counsel the client and the annuity company in light of the specific FIA rules.

Smith Bovill, PC, counsels clients on elder law and Medicaid planning issues regularly as part of its estate planning, probate, and trust administration practice. 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.

Back to Medicaid

Smith Bovill, A Professional Corporation

Contact Us

200 St. Andrews Road Saginaw, MI 48603 Phone: (989) 792-9641 Fax: (989) 792-1116

140 West Tuscola Street, Suite B Frankenmuth, MI 48734 Phone: (989) 652-9923 Fax: (989) 652-3607

The law offices of Smith Bovill represent clients throughout Michigan including Mid-Michigan, The Michigan Thumb, Arenac County, Bay County, Genesee County, Huron County, Isabella County, Lapeer County, Ogemaw County, Roscommon County, Saginaw County, Sanilac County, Shiawassee County and Tuscola County as well as the cities of Saginaw, Frankenmuth, Bay City, Cheboygan, Flint, Gaylord, Grayling, Midland, Mount Pleasant, and West Branch.

Home | About Us | Practice Overview | Estate Planning, Wills & Trusts | Personal Injury | Health Law | Civil & Commercial Litigation | Business & Corporate Law | Governmental & Municipal Law | Environmental Law | Newsletters | Resources | Contact Us | Maps | Attorneys