How do I avoid the Medicaid transfer penalty if I want to make use of immediate annuities to protect my spouse while I am at a nursing home?

To avoid a Medicaid transfer penalty, the annuity must meet the following criteria:

- The annuity must pay back the entire investment. When interest rates were higher, it was possible to purchase annuities for as little time as two years. Currently, short annuities usually won’t be enough to pay back the full purchase price.

- The payment period must be shorter than the owner's actuarial life expectancy. For instance, if the spouse's life expectancy is only four years, the purchase of an annuity with a five-year payback period would be deemed a transfer of assets.

- The annuity must be irrevocable and non transferable, meaning that the owner may not have the option of cashing it out and selling it to a third party.

- The annuity has to name the state as the beneficiary if the annuitant dies before all the payments have been made.

Please call us at Elder Law Associates PA at 1-800-ELDERLAW if you have any questions regarding the above.

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