Disclaimer: With Medicaid, VA, and insurance regulations frequently changing, past blog posts may not be presently accurate or relevant. Please contact our office for information on current planning strategies, tips, and how-to's.
Recently, a trial court in Massachusetts maintained that MassHealth must be named the primary beneficiary on annuities purchased by the community spouse of a Medicaid applicant. Before this recent case, Massachusetts attorneys relied on the Dermody decision to sidestep naming the state as a beneficiary on Medicaid Compliant Annuities provided the transfer was for the sole benefit of the community spouse. Based on the Dermody case, married couples seeking Medicaid eligibility for the institutionalized spouse could avoid estate recovery altogether. Now, new Medicaid planning tactics will be necessary to reduce the risk of MassHealth estate recovery.
An Overview of American National Insurance Co. v. Breslouf
Suzanne Breslouf moved into a nursing home in 2017. In order to qualify her for MassHealth benefits, her husband, Julius, spent down their excess countable assets by purchasing a MassHealth Compliant Annuity. He named MassHealth the primary beneficiary up to the extent of benefits paid on behalf of Suzanne. The couple’s daughter, Jennifer, was named contingent beneficiary.
When Julius passed away in 2020, Jennifer made a claim to the annuity, as did MassHealth. Jennifer argued that the annuity was funded for the sole benefit of Julius, so the requirement that the state must be named a remainder beneficiary should not apply. The Massachusetts Superior Court sided with the state, maintaining that naming a third party as beneficiary would allow the community spouse to potentially safeguard the annuity without limitation, which would directly oppose the purpose of the sole benefit rule.
How Does This Decision Affect Planners and Agents in Massachusetts?
The main impact of this update is the risk of estate recovery on annuities purchased by the community spouse. In order to combat this, Massachusetts practitioners will be looking for an alternative. As an insurance agent or financial advisor, you can recommend their clients use a short-term annuity to reduce the risk of the state recovering against the annuity in the event the community spouse predeceases the term.
When you work with The Krause Agency, you have access to multiple annuity carriers nationwide, including A-rated companies and two carriers in Massachusetts that offer terms as low as two months, one of which exclusively works with us. In addition to limiting the chances of estate recovery, a shorter term allows the community spouse to collect the annuity funds more quickly and continue living comfortably in the community.
Read More: How to Choose an MCA Carrier
If you have questions about this recent case decision or are interested in learning more about MassHealth Compliant Annuity options, contact our team today!