Paying for long-term care is a challenge many families face. MassHealth can help cover these costs, but eligibility rules can be complicated. Annuities are sometimes used as part of Medicaid planning, offering a way to manage assets while securing care. However, not all annuities are treated the same under MassHealth rules. Some can provide financial protection, while others may create obstacles to receiving benefits. Knowing how MassHealth evaluates annuities can help you make informed choices and avoid costly mistakes when planning for future care needs.
What Is an Annuity?
An annuity is a financial product designed to provide a steady stream of income over time. It is typically purchased from an insurance company in exchange for a lump sum or a series of payments. People often use annuities as part of their retirement plans, but they can also play a role in Medicaid planning. Annuities come in different forms, including immediate and deferred options. The structure of an annuity—such as how payments are made and who receives them—determines whether MassHealth considers it a countable asset when assessing eligibility for long-term care benefits.
How MassHealth Views Annuities
MassHealth evaluates annuities carefully when determining eligibility for long-term care benefits. An annuity that does not meet specific requirements may be treated as a countable asset, which can delay or prevent approval for benefits. To be considered compliant, an annuity must meet certain conditions:
- Irrevocable and non-transferable – Once purchased, the annuity cannot be changed or sold.
- Equal monthly payments – Payments must be made in equal amounts over a fixed period, with no lump sums or balloon payments.
- Term limits – The annuity’s term cannot exceed the annuitant’s life expectancy based on actuarial tables.
- Proper beneficiary designation – If the annuitant is receiving MassHealth benefits, the state must be named as the remainder beneficiary after the spouse or another allowable recipient.
If an annuity fails to meet these rules, MassHealth may impose a penalty period, delaying eligibility for long-term care coverage.
Annuities and Medicaid Planning
Annuities can be used in Medicaid planning to convert countable assets into income. This strategy can help individuals or couples qualify for MassHealth while preserving financial stability. However, the annuity must be structured correctly to avoid penalties or delays in benefits.
For married couples, annuities are often used to protect income for the spouse who remains at home when the other requires long-term care. By transferring assets into a properly structured annuity, the healthy spouse can continue receiving income without affecting the other spouse’s MassHealth eligibility.
Timing also matters. Purchasing an annuity too late in the application process or choosing one that doesn’t meet MassHealth requirements can lead to a penalty period. Additionally, annuities are not the best solution for every situation. Depending on a person’s assets and long-term care goals, other Medicaid planning tools may be more appropriate. Careful planning helps ensure annuities provide the intended financial benefits.
Common Mistakes When Using Annuities for MassHealth Eligibility
Annuities can help with MassHealth eligibility, but mistakes in structuring or timing can lead to ineligibility or penalties. Common errors include:
- Purchasing a non-compliant annuity – An annuity that does not meet MassHealth’s requirements may be counted as an asset.
- Choosing a term that exceeds life expectancy – If the annuity’s term is longer than the annuitant’s projected lifespan, it can trigger penalties.
- Naming an improper beneficiary – Failing to designate MassHealth as the remainder beneficiary when required can cause eligibility issues.
- Relying solely on annuities – Other Medicaid planning tools may provide better options depending on the situation.
Careful planning helps avoid these costly mistakes.
How We Can Help
At Surprenant & Beneski, P.C., we guide families through the complexities of MassHealth planning, including the proper use of annuities. Understanding how annuities impact eligibility is important, and our team ensures they are structured to comply with state requirements. We also explore alternative planning strategies to protect assets and secure long-term care benefits. Every situation is different, and we take a personalized approach to help clients make informed decisions that align with their financial and healthcare needs.
Plan Ahead to Protect Your Benefits
MassHealth’s treatment of annuities can be complicated, and mistakes may lead to delays or lost benefits. Careful planning ensures financial security while protecting eligibility for long-term care. Contact Surprenant & Beneski, P.C. today to discuss your options with our team.