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.
Did you know there’s more than one way to structure a Medicaid Compliant Annuity (MCA)? The most beneficial MCA plan is one that’s tailored to your client’s specific needs and circumstances. Keep reading to learn our top five MCA strategies you need to keep in mind.
1. Traditional Community Spouse Plan
This is the simplest and most common MCA strategy for a married couple. The community spouse funds the couple’s excess countable assets into an MCA. The MCA then provides income to the community spouse in return. This strategy can work with both qualified and non-qualified funds, and the community spouse can typically customize the annuity term as long as it does not exceed their life expectancy.
2. Gift/MCA Plan
The Gift/MCA Plan is the most common MCA strategy for a single person. Rather than fund the entire spend-down amount into an MCA, the client uses Medicaid’s rules against divestments to their advantage. They give away approximately half of their assets to a loved one and use the other half to purchase an MCA that pays through the resulting penalty period. Don’t worry—we will help you determine the most beneficial divestment and annuity amounts based on your client’s case facts.
3. “Name on the Check Rule”
While the Traditional Community Spouse Plan works for community spouses who own qualified funds, the strategy becomes more complex when it’s the institutionalized spouse who owns an IRA, since the funds cannot be transferred to the community spouse without incurring taxes. In this case, the institutionalized spouse can convert their IRA to an MCA and designate the community spouse as the payee. Be aware this strategy doesn’t work in every state—contact our office for details.
4. MCA for the Institutionalized Spouse
Similar to the “Name on the Check Rule,” this strategy involves the institutionalized spouse purchasing the MCA. However, in this case, they remain the payee. The goal of this strategy is to shift the annuity income to the community spouse under the Monthly Maintenance Needs Allowance (MMNA) rules. As such, it may be more appropriate for lower-income clients. Plus, this option involves more favorable annuity beneficiary rules than the Traditional Community Spouse Plan.
5. Standalone MCA Plan
As an alternative to the Gift/MCA Plan, single clients can also use the Standalone MCA Plan. This option involves funding the entire spend-down amount into an MCA with the goal of obtaining immediate Medicaid eligibility. Upon the client’s passing, the state Medicaid agency will recover their portion of the remaining MCA funds, and the rest will go to the contingent beneficiary. This option is typically used in states where the Gift/MCA Plan isn’t feasible or when dealing with a client who has a shortened life expectancy.
Read more: How to Know When a Client is a Good Fit for an MCA
Regardless of the strategy you feel is most appropriate for your client, our team is here to help. We’ll provide a comprehensive proposal outlining the MCA plan and its economic benefits. The best part? All proposals and guidance are completely complimentary. Get started today by using our online intake form or by contacting our office at [email protected].
