Question: I am married, live in Connecticut, and my spouse is in a nursing home. The State is telling me that I have too much money to get my spouse on Medicaid. Is there anything I can do to protect my assets at this late stage?
Answer: Medicaid is very state specific in what asset protection techniques work and what techniques do not work. One technique that works in some states, which has been approved by two federal courts and some state courts, is for the healthy spouse to take the excess assets and purchase a single premium immediate payout annuity that pays a monthly check solely to the healthy spouse. This converts what had been excess assets of the couple to income belonging solely to the healthy spouse and this income is hers to keep and need not be spent on the ill spouse’s care.
In a lawsuit filed by the law firm Czepiga Daly Dillman of Newington, Connecticut, U.S. District Court Judge Janet C. Hall ruled on August 13, 2010 that a Connecticut resident did not have to sell an annuity she had purchased in order to have her husband qualify for Medicaid coverage. Attorneys Brendan F. Daly and Paul T. Czepiga, two of the elder law attorneys who argued the case on behalf of their client, noted that the decision affirms the use of annuities to convert assets to much-needed income for many older Connecticut residents who qualify for Medicaid.
In that lawsuit, the husband had been confined to a nursing home since November 2008. The couple had $166,000 more of countable assets than permitted by Medicaid law. In order to qualify her husband for Medicaid, the wife purchased a single premium immediate annuity for $166,000 in order to provide her with a fixed monthly income. That annuity purchase also reduced her countable assets to less than the $109,560 that the state of Connecticut allows in order to qualify for Medicaid.
The state of Connecticut contended that the wife should sell the annuity’s income stream for a lump sum, even though such a sale would have netted only about $98,000 and even though the annuity was irrevocable. In fact, such a sale was not possible because the contract under which the annuity was created prohibited any such assignment. It was the state’s position that if the annuity income could be sold, even at a loss, the wife would be over the $109,560 asset limit and her husband would not, consequently, be eligible for Medicaid.
CzepigaDalyDillman, LLC contended that federal law exempts her annuity’s fixed income in determining her husband’s eligibility for Medicaid benefits. In other words, what had been $166,000 of countable assets was, through the purchase of an immediate payout annuity that complied with federal Medicaid rules, converted to exempt income for the wife’s sole benefit.
Judge Hall ruled as unconstitutional Connecticut’s policy of trying to force a healthy spouse (whose husband or wife is in a nursing home) to sell the income stream produced by the healthy spouse’s annuity.
Paul T. Czepiga, Esq., CELA
Czepiga & Daly, LLC
Newington, Connecticut 06111