War-time veterans can receive up to $1,644 per month to help pay for their care at home or in a care facility. If married the monthly benefit can be $1,949. For the surviving spouse of a war-time veteran, the benefit can be as much as $1,056...or more if she has dependents.
Unfortunately, there are some who sell annuities and other insurance products who are creating a “Ticking Time Bomb” for our veterans and their families.
Some insurance companies and financial services organizations have been promoting their annuity products with the enthusiastic co-operation of some assisted living and other care facilities. On the surface, it seems to be a great partnership. The insurance companies, financial service organizations, and the facilities are helping veterans to obtain a benefit that helps pay for their care — right now. Unfortunately, these companies and organizations only care about the “here and now;” they generally fail to take into account the probable eventual need for the veteran to apply for Medicaid, as well as the tax and investment-related issues associated with obtaining VA benefits. This short-sightedness could result in an assisted living or care facility having some liability to a resident and their family for future loss of eligibility for Medicaid benefits. This is why I call the arrangement a “Ticking Time Bomb.”
It is common for insurance companies and financial service organizations, under the guise of “helping aged veterans,” to suggest that excess assets be given away to the veteran’s adult children and then placed in annuities. This is done to meet VA asset limitations. Unfortunately, if within the next five years the veteran should require long-term care in a nursing home, he or she soon discovers that the rules for obtaining Medicaid benefits are quite different than the rules for obtaining VA benefits. The veterans can be denied Medicaid benefits and penalized for a period of time, largely due to the prior gifting of money to their children so the veteran could obtain the VA benefits.
How can the Medicaid penalty situation be resolved? The only cure is to have the annuities cashed in and returned to the veteran. But wait! Cashing in an annuity often triggers substantial early-withdrawal penalties. Due to these early-withdrawal charges, even if the gifted annuity is cashed in, the family will not have enough money from the annuity to cure the Medicaid penalty. When a veteran’s family realizes that the veteran has lost money and may still be ineligible for Medicaid benefits, they will understandably be upset at the loss of both assets and Medicaid benefits. That is what I mean when I say the insurance companies, financial service organizations, and care facilities who engage in this practice are creating a “Ticking Time Bomb.”
Elder law attorneys owe a fiduciary duty (that’s a high duty of loyalty and protection) to their clients. When elder law attorneys analyze a veteran’s overall situation, they must look at the best interests of the veteran-client – both today and tomorrow.
Elder law attorneys who have spent many years working with senior veterans know that an annuity may be – and often is – an important tool to use in both VA and Medicaid planning. But use of an annuity for long-term care qualification purposes must always be coordinated with the probable future needs of the veteran in mind – the probable need for the veteran to eventually qualify for Medicaid. Thus, most annuities ... the ones generally recommended by insurance companies and financial services organizations ... should not be used. Instead, very special annuities must be used – SPIA annuities that have been tweaked in just the right way, i.e., amended with very specific language most attorneys and financial professionals do not know about.
This article is to be published in the October 2009 issue of the Southern Business Journal. To read this article on the SBJ website, click here.
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