Simply stated, the answer is “No”, “No”, and “No”. There are no instructions to explain how to fill-out the Medicaid Application. Consequently, this results in many hidden traps that could have been avoided. I have a retired attorney friend who believed he could help his family member complete the Medicaid Application–he ended up receiving a “first-look denial” of benefits for that family member. Medicaid workers, at most offices, do not know how to fill-out the application, nor do they have a vested interest in your cause. Remember, it is the function of the Medicaid office to deny you benefits that you are entitled too! It can become very adversarial at times. Medicaid wins when you get frustrated with the system and drop your claim for benefits. The private pay rate for a local nursing home is typically anywhere from $7,000 to $10,000 per month depending upon services needed. Mistakes can be very costly.
If you are facing a long-term care situation in your family, please do not hesitate to contact our office at (888) 829-0894 to disuss your matter–we are here to help.
Yes, a tax-deferred annuity can easily be converted into a Medicaid Compliant Annuity.
If the current carrier does not provide a Medicaid Compliant Annuity, the tax-deferred annuity can be “transferred” to the desired carrier by way of a 1035 exchange.
A 1035 exchange refers to the section of the tax code that allows investors the flexibility to exchange one annuity for another without incurring any immediate tax liabilities. Generally, the surrender of an existing insurance contract is a taxable event since the contract owner must recognize any gain on the old contract as current income. However, under IRC § 1035, when one life insurance, endowment, or annuity contract is exchanged for another, the transfer will be nontaxable, provided certain requirements are met.
Requirement One: Ownership
The owner and insured, or annuitant, on the new contract must be the same as under the old contract. However, changes in ownership may occur before the change is completed.
Requirement Two: Like for Like
Any type of contract cannot be exchanged for any other type of contract. The following rules must be followed in order to avoid tax consequences:
- Old Life Contract » New Life Contract
- Old Life Contract » New Annuity Contract
- Old Endowment Contract » New Annuity Contract
- Old Annuity Contract » New Annuity Contract
The exchange process can be initiated by simply completing a transfer form with the new Medicaid Compliant Annuity application.
These are highly specialized financial products and only a select few firms in the industry have expertise in this area. Because qualification (or potential ineligibilty) for Medicaid benefits and, possibly, one’s life savings are at stake, you should only consult with a qualified professional advisor. The Wall Law Group welcomes your inquiries in this regard.