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The "Name on the Check Rule"
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Married Couple Case Study

Hi, I’m Stuart Otto, Sales Manager for Krause Financial Services. Today, we’re going to walk through a case study for a married couple using a traditional community spouse plan.

If your client is married and looking to become eligible for Medicaid benefits, they can either use a traditional community spouse strategy or the “Name on the Check Rule” strategy. Today, we are going to explore the traditional strategy. However, if your client owns an IRA and is trying to spend down, you may want to watch our “Name on the Check Rule” video to learn more about that strategy.

The traditional strategy will allow an institutionalized spouse to gain Medicaid eligibility while the community spouse is able to maintain their current lifestyle.

Meet Betty and Richard. Betty is 79 and Richard is 82, and they live in Nebraska. Richard has been in decreasing health and has decided to enter a nursing home. His cost of care is $7,000 a month. Betty has an income of $1,100, and Richard has an income of $1,600.

Their total assets are $265,000. The Community Spouse Resource Allowance, or CSRA, that Betty is allowed to keep, is $126,420. We will subtract the CSRA and the Individual Resource Allowance of $2,000 from the couple’s total assets to get the spend-down amount. The spend-down amount will be $136,580. They use that amount to fund a Medicaid Compliant Annuity, or MCA.

After talking with her attorney, Betty decides that a period certain of 36 months is the best option. Because Betty is 79, her Nebraska life expectancy is 10.24 years or 122.88 months, so the 36-month annuity term would be within her life expectancy and would make the annuity actuarially sound.

With the single premium being $136,580 and the period certain being 36 months, the payout will be $3,830 a month with the total payout at $137,880 dollars.

Betty’s new monthly income will be $4,930 when we add up her monthly annuity payment and her Social Security income. Because her income is over the Maximum Monthly Maintenance Needs Allowance, she will not receive an income shift from Richard.

In order to figure out Richard’s Medicaid co-pay, we subtract his income of $1,600 from his personal needs allowance of $60. Richard’s Medicaid co-pay will $1,540.

If your client wanted to create an income shift from the Institutionalized Spouse’s income in order to make their Medicaid co-pay less, they can extend the period certain of their annuity. If your client does want to extend the period certain, make sure they keep it within their life expectancy and take the community spouse’s health into consideration.

If they expect the community spouse to live for many more years, extending the annuity term may be a good option. If they outlive the annuity period certain, then the state Medicaid office will not be able to collect on the annuity.

However, if your client does pre-decease the annuity term, the state Medicaid office will be able to collect what they have paid out for the institutionalized spouse’s care.

Let’s say Betty and Richard decide to extend the annuity term. The single premium will still be $136,580, but the period certain will now be 72 months. The new MCA monthly payment will be $1,940 for a total payout of $139,680.

Betty’s new total income, including her Social Security income, would be $3,040. Because her new income is under the maximum Monthly Maintenance Needs Allowance, or MMNA, she is allowed a shift in income from Richard.

We will subtract the income of $3,040 from the Monthly Maintenance Needs Allowance of $3,160.50. Every month, she will receive a shift in income of $120.50.

To calculate Richard’s new Medicaid co-pay, we subtract both his Personal Needs Allowance and the shift in income from his monthly income. His new Medicaid co-pay will be $1,419.50.

Had the couple decided to do nothing, they would have exhausted their entire spend-down amount in approximately 20 months.

If Betty chooses to use a shorter period certain, her income of $4,750 would be more than she would receive under MMNA rules alone. She also has a better chance of outliving the annuity term, which prevents the state Medicaid agency from collecting against the MCA as primary beneficiary.

And if she chooses to use a longer period certain, she will be saving money by receiving the income shift from Richard.

Regardless of your client’s situation, we have solutions to help them become Medicaid eligible. If you’d like to learn more about your client’s options when needing care, contact our office at 855-552-5893 to speak with a Benefits Planner.

I’m Stuart Otto, and thanks for watching.

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The "Name on the Check Rule"
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