Annuity Planning, IRAs and Medicaid Eligibility

While the Ohio Tenth and First District Courts of Appeals have both unanimously ruled that a “well spouse” may utilize immediate annuities, the agency is still attempting to litigate those cases in the other eight Ohio Appellate districts.

For example: Husband enters a nursing home, has $1,200 of Social Security income. Wife still resides at home with $800 a month of Social Security income. The couple’s assets consist of bank accounts, IRAs and other various accounts totaling $200,000. In this circumstance, the well spouse may consider utilizing an immediate annuity to enhance her position both in the short and long term.

An immediate annuity provides that an insurance company will make payments to the individual or their spouse for the balance of their lifetimes. Once this annuity contract is completed, it cannot be revoked or revised. For example, if the “well spouse” purchased an immediate annuity for $100,000, she may receive in the neighborhood of an additional $800.00 per month for the balance of her life. During her husband’s lifetime, this will not have a significant benefit. However, upon his death, his social security will disappear.

Based upon this fact scenario, she would still have roughly $1,600 per month between the Social Security and the annuity. Had she not entered into this plan, her fixed income upon her husband’s death would have been $800 per month. While this sort of planning is beneficial to the well spouse and will enable her to continue living independently, the agency has challenged this approach as it allows the husband to become eligible for Medicaid after only spending $50,000 (if the annuity is purchased) as opposed to $100,000 towards his nursing home care prior to Medicaid eligibility. The Tenth and First District Courts of Appeals have both found this approach to be appropriate and the Ohio Supreme Court refused the state’s request to review the First District Court of Appeals’ Decision this year. Two Akron attorneys have asked for our firm’s assistance, and we are currently litigating a case in Federal District Court to obtain a final decision and to stop the state from litigating this matter eight more times (there are ten District Courts of Appeals).