While many of your clients may outlive their Medicaid Compliant Annuity (MCA) term, some may pass away before the contract ends. So, what happens then? Well, it depends on a few important factors, including who owns the annuity, who is listed as the primary beneficiary, and what state your client is in. Here’s what you need to know.
Who Is the Primary Beneficiary?
If the MCA is owned by a single person or the community spouse, the primary beneficiary is typically the state Medicaid agency. However, certain states allow the institutionalized spouse to be named the primary beneficiary ahead of the state Medicaid agency. Additionally, if the MCA owner has a minor or disabled child, the child may be named the primary beneficiary. If the MCA is owned by the institutionalized spouse, on the other hand, the community spouse may be listed as the primary beneficiary with the state Medicaid agency as contingent.
Contact The Krause Agency to find out if your state or your client’s specific situation qualifies for any of these exceptions.
State Medicaid Agency
As the primary beneficiary, the state Medicaid agency can collect up to the amount of benefits expended on behalf of the institutionalized individual. If there is any remaining balance, it is then passed on to the contingent beneficiary, which is typically the contract owner’s spouse or other loved one.
Spouse of Other Loved One
If the primary beneficiary is the spouse, a minor or disabled child, or another loved one, they have a few options for collecting against the MCA. These options vary by insurance carrier and may include a continuation of annuity payments until the end of the term or a discounted lump sum payout of the remaining funds. One of our exclusive carriers offers an additional—and highly appealing—option to take a full lump sum payout with no discount.
Learn more: How to Choose an MCA Carrier
What About the Contingent Beneficiary?
In cases where the state Medicaid agency is the primary beneficiary, the agency will make its claim up to the amount of benefits expended on behalf of the institutionalized person. The contract is then passed to the contingent beneficiary, which is typically the MCA owner’s spouse, children, or another loved one. The contingent beneficiary can then choose whether to continue receiving the MCA payments or get a lump sum payout (discounted or full, depending on the carrier) of the remaining funds.
If the community spouse, child, or other loved one is the primary beneficiary, they can take over the contract and name their own beneficiaries, effectively removing the state Medicaid agency from making any claim.
What If the MCA Owner Passes Away Before the End of the Penalty Period?
If you have a single client who is using the Gift/MCA strategy and passes away before the end of their annuity term, the state Medicaid agency has no claim on the annuity, even if it is listed as the primary beneficiary. Since the MCA term is structured over the penalty period, the state Medicaid agency has not yet expended any benefits on behalf of the institutionalized person. That is, unless the individual received Medicaid benefits prior to this instance of institutionalization.
What to Do If Your Client Predeceases Their MCA
Did your client recently pass away? If so, contact our team at The Krause Agency and let us know. Once we have the death certificate and other relevant documentation, we will go through the death claims process on your client’s behalf. If you have any questions about MCA beneficiary options and how the claims process works, give us a call at (800) 255-1932.