The Power of Private Annuity Plans

  • Likelihood of Nursing Home Admission - If you are over 65 there is a 43% chance that you will require admission to a nursing home during our lifetime. The average stay at a nursing home is 28 months, and can cost $6000.00 or more per month.
  • Traditional Planning - Traditional techniques have been criminalized, making it a felony under federal law to transfer assets in order to qualify for Medicaid. The law also imposes criminal liability on any paid professional who counsels someone to transfer his or her assets in order to qualify for Medicaid.
  • Wealth Preservation - It's not against the law to purchase annuity contracts that comply with the technical requirements of H.C.F.A. 64. These annuities can be the traditional commercial type, or private. By purchasing an annuity, a tangible asset can be converted into a stream of payments. If the annuitant dies before the end of the annuity, the remainder of the annuity can pass to his/her heirs.
  • Asset Protection - By transferring assets into a stream of payment, the asset is not available for the nursing home. The monthly payment must be paid to the nursing home, but it is often less than the $6,000.00 per month cost of the nursing home, and Medicaid usually pays the difference. Usually the monthly payments will remain available long after assets would have been exhausted had nursing home admission forced those assets to be liquidated to pay for nursing home care.

Understanding the Private Annuity Plan

  • The Annuity - The private annuity is a contract between two people, where one (the annuitant) transfers cash or other assets in exchange for monthly or periodic payments for a specific period of time. If the annuitant dies before all of the payments are made, the remaining payments are paid to a designated beneficiary.
  • Technical Requirement - The Health Care Financing Administration has set forth specific requirements as to the length of time in which the annuity can be written, and the interest rate that it must pay. If the annuity meets these technical requirements, the purchase of the annuity is not considered a "transfer" of an asset and does not violate current law.
  • Income - During the term of the annuity the income is paid to the annuitant, who can spend the money on a personal services contract (thereby legally transferring it to relatives), or can contribute the monthly payments toward his/her own nursing home care, (if a nursing home resident at the time the payment is received). This technique will preserve assets since the payments being turned over to the nursing home are usually less than the monthly cost of residing in the home and the difference is often paid by Medicaid.
  • Taxation - The income received by the annuitant will be partly return of principal and partly income, and if property is exchanged for the annuity, may also be part capital gains. Special (usually favorable) tax rules also apply to the party paying the annuity.

Is a Private Annuity Plan Right For You?

  • Are you or a family member facing an immediate nursing home crisis?
  • Are you currently spending your family's resources on nursing home care?
  • Have you been told that there is nothing to do but spend down your life's savings until you qualify for welfare?
  • Do you, or a member of your family have a slowly progressing illness which may require future nursing home admission?
  • Are you concerned about preserving your family's wealth in the event of a nursing home admission?