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Medicaid Compliant Annuity vs Medicaid Trust

When buying a Medicaid compliant annuity know total combined income

Medicaid Trust vs Medicaid Compliant Annuity

In addition to the discussed Medicaid compliant annuity, a Medicaid trust work in a similar way. Some clients will prefer to use a Medicaid trust instead of an annuity for two main reasons. The first reason is that some of the assets are better protected in a trust which can help to avoid liquidation and tax liabilities. The second reason is that there are very few attorneys that are also licensed to use certain insurance products. This leads to the over reliance on annuity trusts, which are very costly. Annuity best way to protect assets such as 401(k) and IRA
Some attorneys will state that the annuity is the best way to protect assets such as a 401(k) and IRA. The owner would be requires to incur all of the tax liabilities that are associated with the distribution of the assets if these plans were to be liquefied. However, it is possible to roll these assets over into a Medicaid compliant annuity. The payout structure would then meet the rules for Medicaid. The payout can occur over a period of time, which is usually when the co-payments are considered to be a partially deductible expense. These expenses can sometimes offset the tax liabilities.

Medicaid complaint annuities will combine with pension payments and Social Security payments

Regardless of what the client has for assets, they must always be very careful when dealing with combined monthly income. The income that is generated from a Medicaid compliant annuity will combine with all other forms of income, including pension payments and Social Security payments. It is important that clients find a way to stay below the allowed income amount. The reason this is important to know is because many people will purchase a large annuity in order to qualify for Medicaid immediately. While this may seem like a good idea at the time, it can be harmful. If the annuity generates too much income for the client, they will be completely disqualified from Medicaid.

Medicaid applicants should know their entire income sources before buying Medicaid compliant annuities

The goal behind purchasing a Medicaid compliant annuity is to become eligible for Medicaid without having to spend down assets. It is important to be aware of how much income the purchased Medicaid annuity will generate. If this amount, combined with other income sources it will place the Medicaid applicant above the income limits. Medicaid applicants should not purchase such a large annuity. Instead, they may want to spend down some of their assets (eg. money) and purchase the annuity with the rest. The smaller annuity will generate less income, increasing the chances of remaining eligible for Medicaid benefits. This is just another aspect of Medicaid planning that must be thought over before acting. Medicaid income limits are very strict, so all clients must know what their income will be when all of their sources are combined.
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