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- #22
I am aware of the issues mentioned in regards to income generated from this type of arrangement. However, when I pressed the Client for more information, etc. he politely has informed me he has paid for up to date legal advice on this matter and he only needs an agent to write the business. I always do case notes which I include in my files outlining all emails, conversations, and circumstances regarding the case. In this instance I will notate all the info., ask the Client to sign it. I don't want nor do I feel I should be giving advice on the Medicaid part of it and will not mention that a as a factor in my case notes. Does anyone else use a recap from first meeting to sale for their files?
Golfnut,
Are you saying that as an insurance agent you are not responsible for determining the suitability of a product you sell?
With all of the scrutiny taking place by state attorneys general and departments of insurance regarding the sale of annuities (in general) and the sale of annuities to seniors (in particular), I think you'd want to be a little more circumspect.
Are you saying that as an insurance agent you are not responsible for determining the suitability of a product you sell?
With all of the scrutiny taking place by state attorneys general and departments of insurance regarding the sale of annuities (in general) and the sale of annuities to seniors (in particular), I think you'd want to be a little more circumspect.
- 1,802
We will have to agree to disagree. There was recently a case here in Arkansas that was up-held that employed the half-loaf strategy.
I am not a fan of any type of Medicare advoidance programs; but they do exist.
Even though the half-loaf strategy has been changed to accommodate the new laws; it has not been NULLIFIED.
I will let the attorneys do their job, and continue to do mine.
Insurancexec,
We're not disagreeing. We are just using different names to describe the same thing.
You are calling the "Community Spouse Resource Allowance" the "half a loaf" strategy.
You are incorrect in naming it that.
The CSRA was available before DRA. The DRA did NOT change the CSRA rules.
Anyone who is interested can learn more about the CSRA at:
Medicaid Rules - ElderLaw Articles
We're not disagreeing. We are just using different names to describe the same thing.
You are calling the "Community Spouse Resource Allowance" the "half a loaf" strategy.
You are incorrect in naming it that.
The CSRA was available before DRA. The DRA did NOT change the CSRA rules.
Anyone who is interested can learn more about the CSRA at:
Medicaid Rules - ElderLaw Articles
- 1,802
It is obvious that you are very knowledgeable on this topic; and I congratulate you for being so. My question to you would be this:
In knowing that the half loaf strategy is still being used; what are the parameters of the "new" half a loaf strategy?
It is very difficult now.
The soundest approach that I've heard of is where someone gifts all their assets to the children/heirs, then applies for Medicaid (and is disqualied for a period of time because of the transfer) and then the children use the assets to pay for their parent's care. Each month the children pay for the care reduces the penalty period by a month.
The reason the DRA did away with the 'half a loaf' strategy is because the DRA changed the start of the disqualification period (from the date of the transfer of assets to the date of applying for Medicaid.) So, now, in order to make it work, someone has to give away enough of their assets (usually more than half) in order to make sure that they can qualify for Medicaid immediately (both income-wise and asset-wise) except for the disqualification period. The point is: it ain't easy.
It WAS EASY before DRA, because the disqualification period started counting down from the date of the transfer of assets. Now, the disqualification period starts from the date of application for Medicaid. HUGE DIFFERENCE.
You can learn more here:
Medicaid Planning - ElderLaw Articles
The soundest approach that I've heard of is where someone gifts all their assets to the children/heirs, then applies for Medicaid (and is disqualied for a period of time because of the transfer) and then the children use the assets to pay for their parent's care. Each month the children pay for the care reduces the penalty period by a month.
The reason the DRA did away with the 'half a loaf' strategy is because the DRA changed the start of the disqualification period (from the date of the transfer of assets to the date of applying for Medicaid.) So, now, in order to make it work, someone has to give away enough of their assets (usually more than half) in order to make sure that they can qualify for Medicaid immediately (both income-wise and asset-wise) except for the disqualification period. The point is: it ain't easy.
It WAS EASY before DRA, because the disqualification period started counting down from the date of the transfer of assets. Now, the disqualification period starts from the date of application for Medicaid. HUGE DIFFERENCE.
You can learn more here:
Medicaid Planning - ElderLaw Articles
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- 1,802
One final question:
http://www.nysscpa.org/cpajournal/2008/208/images/p58.pdf
What do you think about this?
1) This confirms what I said earlier. The "half a loaf" strategy (which was the most commonly used strategy before the DRA) is NOT listed as a viable strategy post-DRA.
2) "spousal refusal" is not allowed in most states. To my knowledge, "spousal refusal" is only allowed in the state of NY (which is the state for which this list was created).
3) "gifting of assets" to a spouse is listed, but the community spouse can only keep up to $109k in order for the other spouse to qualify for Medicaid.
Is there something pertinent that I missed?
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One more point:
DRA compliant annuities is listed as one of the strategies that can work now.
That is true.
In order for an annuity to be "DRA compliant" it has to be "actuarially sound". In other words, an 85 year old can't take out a 20-year term certain annuity, because that's beyond her life expectancy.
Additionally, in order to be DRA-compliant, the state has to be listed as the primary beneficiary.
In other words, the DRA put a stop to a lot of the planning techniques (including "medicaid friendly annuities) that were used before the DRA.
A "DRA Compliant annuity" can still work. I gave an example of that yesterday. In that example, the married couple had $300,000 of "countable assets". Instead of choosing to spend $200k of it on one spouse's care, they could put between $200k to $300k in a DRA compliant annuity. And the community spouse would receive the payments from that (roughly $40k to $60k per year). The "countable asset" which would have had to have been spent down, is instead, turned into an income stream for the healthy/community spouse.
However, it can't work in the example which golfnut has given. The size of the annuity payments will automatically disqualify the wife from Medicaid each year.
Can DRA compliant annuities work? yes.
Will they work in every situation. No.
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