The Gift/MCA Plan (also known as the Half-a-Loaf Plan) is the most popular Medicaid Compliant Annuity (MCA) planning strategy for a single person. The goal of this strategy is to create a wealth transfer to the client’s intended heir(s) in the form of a divestment, triggering a penalty period. The client then uses their remaining assets to purchase an MCA, which will help them privately pay for care during the penalty period. The MCA term is structured to be congruent with the penalty period, so the annuity contract is terminated when the penalty period ends. Meanwhile, the divested funds are protected from recovery by the state Medicaid agency.
The Gift/MCA Plan Process
- Create a wealth transfer to a loved one.
- Fund the remaining spend-down amount into an MCA.
- Apply for Medicaid benefits.
- The divestment triggers a penalty period of ineligibility.
- Use the MCA payments to privately pay for care during the penalty period.
Gift/MCA Plan Calculations
We use a unique, proprietary formula to determine the maximum possible divestment amount that still leaves enough funds for the annuity and subsequent payments. The divestment amount typically ends up being about half of the spend-down amount, and the MCA is purchased with the remaining funds. If you have a client who may benefit from the Gift/MCA Plan, we will provide these calculations at no charge and with no obligation to proceed.
Considerations When Using the Gift/MCA Plan
As with any MCA strategy, using the Gift/MCA Plan has a few caveats.
- If the individual predeceases the penalty period and annuity term, they will not have gained any economic benefit, since they will have been privately paying for care during that time.
- Some states enforce income restrictions that render the Gift/MCA strategy not viable. In these cases, a single person can utilize the Standalone Plan.
Learn More: What Is the Standalone MCA Plan?
If you’re not sure which MCA strategy is right for your client, contact our office to discuss your case with us!