Federal Court Approves Community Spouse's Purchase of Annuity to Shelter Excess Resources

Earlier this week, the United States Tenth Circuit Court of Appeals issued what might be considered a landmark decision in the realm of "crisis" Medicaid planning.  In Morris v. Oklahoma Dept. of Human Resources (10th Cir., No. 10-6241, July 9, 2012), the Court held that a Community Spouse may use assets in excess of the Community Spouse Resource Allowance ("CSRA") to purchase an immediate annuity, which effectively converts non-exempt resources into an income stream. This strategy allows a Community Spouse to avoid having to spend down all of their excess resources in order for a sick or disabled spouse to be eligible for nursing home Medicaid coverage.

In New York, community spouses are presently permitted to retain excess resources by executing a "spousal refusal," which effectively renders the assets and income of a refusing spouse as unavailable for determining a community spouse's Medicaid eligibility.  However, many counties are now actively bringing post-Medicaid approval "support actions" against refusing community spouses who retain assets in excess of the CSRA.  Like the community spouse in Morris, a community spouse residing in New York may consider purchasing an immediate annuity to convert excess resources into an income stream, thereby rendering that spouse less of of a target for a spousal recovery lawsuit.

The entire Morris opinion can be read here.