MassHealth Planning with Annuities

When one member of a couple requires nursing home care and seeks MassHealth assistance to contribute to the cost of care, the general rule of MassHealth eligibility is that the nursing home resident is eligible for assistance if the couple possesses no more than a home (with some exceptions) and approximately $140,000 in other assets: assets beyond $140,000 are considered “excess” assets and will disqualify the nursing-home member from MassHealth eligibility. The expectation is that after the “excess” assets are spent on care, the state then will pitch in.

In this circumstance purchase of an “immediate” annuity may be an effective MassHealth planning tool. In general, applying "excess" assets to the purchase of an annuity transforms disqualifying excess assets into non-disqualifying income to the at-home spouse. This strategy, however, must be carefully executed. 

An immediate annuity, in simple terms, is a contract with an insurance company pursuant to which the consumer pays a lump sum to the company in exchange for immediate (as opposed to deferred), monthly payments from the company. Generally, the total amount of the monthly payments will exceed the lump sum payment. 

The annuity purchase must satisfy the following requirements:

■ the annuity contract must be irrevocable: the purchaser cannot ask for return of any of the purchase price

■ the monthly payments must be equal and in total at least equal the purchase price

■ the annuity contract must be “actuarially sound,” that is, the purchase price must be paid back during the purchaser’s (at-home spouse’s) life expectancy  

■ the state must be named the remainder beneficiary up to the amount of MassHealth benefits paid in behalf of the at-home spouse

Generally, purchase of an annuity should await a nursing home placement.

In this situation, it is often advisable for the at-home spouse to revise her or his will to omit the “nursing home” spouse, lest the amounts left by will to the nursing home spouse must then be applied to nursing home costs.

Note that this article is a general discussion and does not provide legal advice. Every situation is different and small differences in facts can create large differences in outcomes. Consult a qualified attorney before undertaking any “MassHealth” planning.