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Jane Wolk
Trusts & Estates
and Elder Law Update

Medicaid Planning Using a

Single Premium Immediate Annuity 

In our July 2022 newsletter, we discussed the basic requirements of applying for Medicaid benefits in New Jersey to pay for long term care. You can find that newsletter here. Today, we will discuss the use of a Single Premium Immediate Annuity (“SPIA”) as a tool for Medicaid planning.

As discussed in our July 2022 newsletter, in order to qualify for Medicaid benefits, there are a number of eligibility requirements that must be met, including an asset limit of $2,000 for a single applicant. If such a single applicant has assets over $2,000, he or she must spend these assets down before becoming eligible for benefits. Of course, depending on your marital status and if one or two individuals in a marriage are applying for Medicaid benefits, the asset limits differ. Please refer to our July 2022 newsletter for the specific asset limits.  A SPIA allows a Medicaid applicant the opportunity to convert available and countable principal assets into non-countable and exempt income. Properly structured, the SPIA is a spend-down tool that eliminates excess resources that would disqualify an applicant that may be otherwise eligible to qualify for Medicaid to assist with the funding of long term care services.

The Medicaid applicant would pay a single lump sum (the premium) into the SPIA. This converts the applicant’s assets into an immediate income stream and, if properly structured, the annuity would have no cash value. Therefore, Medicaid will not count those assets towards the countable asset limit, but will, instead, count the income distributions towards the applicant’s available income. For a single applicant, the income limit in 2022 is $2,523 per month. Please refer to our July 2022 newsletter for other income limits depending on marital status and who is applying.

For a SPIA to be eligible for use in Medicaid planning in New Jersey, it must be:

  • Irrevocable;
  • Non-assignable; and
  • Actuarially sound.

The SPIA must also:

  • Designate the State Medicaid agency as beneficiary; and
  • Provide for equal payments with no deferred payments or balloon payments.

Medicaid planning is complex and is only further complicated if one spouse is applying for benefits and the other spouse is not. It is therefore strongly encouraged that individuals, or those applying on behalf of a loved one, seeking to obtain Medicaid benefits consult with professionals that are familiar with Medicaid planning techniques. Pashman Stein Walder Hayden, P.C. has such professionals that are ready and willing to assist you or your loved ones in such Medicaid planning. If you have further questions about SPIAs or Medicaid planning in general, do not hesitate to contact us.

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