For married clients facing a sudden need for nursing home care, one of the biggest concerns is what happens financially to the spouse who remains at home. Even when Medicaid coverage is available, couples are often shocked to learn how much of their savings must be spent down before benefits can begin. Without a strategy, this can quickly destabilize the financial security of the healthy spouse and jeopardize the retirement plans you helped them build.
Medicaid Compliant Annuities (MCAs) offer a powerful solution for protecting assets in these situations, allowing advisors to support both spouses during a long-term care crisis.
The Challenge Your Clients Face
When one spouse enters a nursing facility, Medicaid will review the couple’s combined assets when determining eligibility. The healthy spouse, also known as the community spouse, is allowed to keep more resources than the institutionalized spouse, but anything above that threshold must be spent down.
For couples with accumulated retirement savings, this can mean liquidating assets at the worst possible time, potentially undermining the community spouse’s ability to pay for housing, healthcare, and daily living expenses.
Without planning, the healthy spouse may be left with far fewer resources than they need to maintain their lifestyle.
The Opportunity: Turn Countable Assets into Income
A Medicaid Compliant Annuity allows the couple to convert excess assets into a stream of income for the community spouse. To be considered Medicaid-compliant, the annuity must meet specific requirements, including:
- Irrevocable and non-assignable terms
- Actuarially sound payout period
- Equal monthly payments
- State Medicaid agency designated as primary beneficiary (up to benefits paid), in most cases
Because the income paid to the community spouse is generally not counted toward the institutionalized spouse’s Medicaid eligibility, the couple can meet asset limits while preserving income for the spouse at home.
Read More: What Are the Asset Limitations for Long-Term Care Medicaid?
The Importance of Protecting Funds for the Healthy Spouse
The chief advantage of an MCA is its ability to preserve assets that would otherwise be spent down while providing income the community spouse can use to:
- Remain in the home
- Cover everyday expenses
- Maintain health insurance and medical care
- Avoid financial dependence on children
- Protect long-term quality of life
This is especially valuable when the community spouse lacks independent income or relies heavily on joint retirement assets. For many families, the MCA becomes the difference between financial stability and hardship.
Where MCAs Fit in Your Planning Strategy
MCAs are primarily used in crisis planning situations when Medicaid eligibility is needed quickly, and the couple has assets that exceed Medicaid’s limits. An MCA is especially helpful when:
- Clients have limited long-term care coverage or none at all
- A long-term care event occurs unexpectedly
- The healthy spouse needs reliable monthly income
- There is urgency to qualify for Medicaid benefits
MCAs can help you deliver a solution that preserves resources and supports the healthy spouse at a critical time.
Read More: How to Spend Down Retirement Accounts for Medicaid
Key Considerations for Advisors
While MCAs are an effective tool, they aren’t appropriate for every situation. Advisors should carefully consider each client’s specific situation and develop a unique plan based on their health, tax implications, estate recovery considerations, and other important factors. MCAs should be recommended as part of a holistic strategy, in collaboration with an elder law attorney when needed.
If you need help determining the best MCA strategy for your case, reach out to our team!
Elevate Your Value in Crisis Planning
For advisors working with aging clients, Medicaid Compliant Annuities offer a valuable way to support families during one of the most financially stressful periods of their lives. By helping clients secure Medicaid benefits while protecting the healthy spouse from financial hardship, you position yourself as a trusted resource with solutions beyond traditional insurance and retirement planning.
As long-term care costs continue to rise, tools like MCAs will play an increasingly important role in protecting retirement income and preserving dignity for aging couples.