A Medicaid Compliant Annuity (MCA) is a specialized financial tool designed to help seniors qualify for financial assistance while protecting their assets. For agents and advisors, an MCA provides a legal and strategic way to help clients spend down excess countable assets that would otherwise delay Medicaid eligibility.
Technically speaking, an MCA is an income-only, single premium immediate annuity designed to work with Medicaid’s requirements by converting assets into income. This conversion allows individuals to reduce their countable assets while ensuring a steady flow of income, ultimately helping them meet Medicaid’s strict financial requirements.
| Travis Bitters The Krause Agency Medicaid Annuity Specialist |
However, not just any annuity qualifies as Medicaid compliant. To be accepted under Medicaid guidelines, an MCA must meet five key requirements.
An MCA cannot be altered, canceled, or cashed out once established. The contract terms—including the payment amount, annuitant, and term—must remain fixed for the duration of the annuity.
The annuity cannot be transferred or sold to another party. This ensures the asset remains within the Medicaid framework and cannot be liquidated for immediate cash value.
The annuity must be structured so that the full payout is expected to occur within the owner's Medicaid life expectancy. If the term exceeds this expectancy, Medicaid may treat the annuity as a countable asset, impacting eligibility.
An MCA must provide equal, periodic payments throughout the term—typically monthly—with no deferral periods or balloon payments at the end. This ensures the annuity follows Medicaid’s structured income guidelines.
In most cases, the state Medicaid agency must be named as the primary beneficiary upon the owner’s passing, at least up to the amount of Medicaid benefits paid on the institutionalized individual’s behalf. Exceptions to this rule may exist in cases involving married couples and disabled or dependent children as well as in certain states.
An MCA may be the right solution for clients who:
To effectively utilize an MCA for Medicaid planning, it’s crucial to ensure the product is structured correctly based on state-specific Medicaid rules. Our team at Krause Agency specializes in navigating these regulations and can help you determine the best approach for your client’s unique situation.