Preserving family assets when faced with an ill spouse
Annuity saves assets for other spouse when one is faced with extensive nursing home care.
Long-term nursing home care is a necessity for nearly 1.4 million Americans, but it is an expensive necessity. A commonly held belief is that Medicare covers the cost of nursing home care; however, outside of skilled nursing care and rehabilitation, nursing home care is not covered. To access long-term nursing home care, many turn to their own resources or Medicaid to cover the costs of care. Long-term care insurance, IRAs, annuities, savings, and other financial instruments may help cover the cost of nursing home care. Unfortunately these items are often exhausted before an individual’s needs are fulfilled. Moreover, depleting personal resources may impose a hardship on families of nursing home residents, particularly the spouse of a person institutionalized in a nursing facility (“the community spouse”). The Medicare Catastrophic Coverage Act of 1988 does allow the community spouse to keep a portion of the couple’s assets. The portion of the couple’s assets that the community spouse may keep is termed the community spouse resource allowance (CSRA). However, for those who have resources over the allowable amount for Medicaid eligibility, depleting the assets or transferring assets may be necessary. An individual must be careful in transferring assets to avoid creating a transfer penalty. The timing of the transfer and the instrument used are especially important. One planning strategy involves the use of a properly timed annuity, which may save the financial life of the community spouse
