John Crow 
When families in Clarksville face the reality of a loved one needing nursing home care, the conversation centers around assets and the expense of nursing care. The average cost of a private nursing home room in Tennessee can easily exceed $8,000 a month. Most families cannot afford to pay that for long, and few realize how quickly life savings can vanish.
When faced with this scenario, you may be asking questions such as:
- Will the nursing home take all my assets?
- Do I have to spend all of my money before Medicaid will help?
- How can I preserve assets for my spouse if I have to go to a nursing home?
Many of these questions usually lead to a deeper conversation about Medicaid-compliant annuities, one of the few legal ways to protect assets and qualify for TennCare coverage sooner. Let’s take a look at how these annuities work.
Mary and Harold’s Story
Mary and Harold have been married for fifty-five years. They worked hard, raised their children in Clarksville, and managed to save about $250,000 between retirement accounts and savings. They own their home on the outskirts of town free and clear. Harold has recently developed advanced Parkinson’s disease and now requires full-time care in a skilled nursing facility.
Marry is worried that Medicaid would require her to spend nearly all of their savings before Harold could qualify for coverage. She needs to protect enough income to maintain her own standard of living while still getting Harold the care he needed.
That is where a Medicaid-compliant annuity comes in.
How Does a Medicaid Annuity Work?
A Medicaid annuity is a special financial tool that converts excess assets into a guaranteed stream of income. Instead of keeping $150,000 sitting in a bank account that Medicaid would count against them, Mary used that money to purchase an annuity that pays her $2,500 per month for five years.
By doing that, the $150,000 is no longer treated as a countable asset for Medicaid purposes. The payments Mary receives each month are treated as her income, which is allowed under Medicaid rules. This lets Harold qualify for Medicaid much sooner without Mary having to deplete their life savings.
How A Medicaid Annuity Works in Tennessee
In Tennessee, Medicaid (called TennCare) has very specific rules for what makes an annuity Medicaid compliant. The annuity must be:
- Irrevocable – once purchased, it cannot be changed or canceled
- Immediate – payments must begin right away
- Equal payments – there can be no balloon or deferred payments
- Actuarially sound – the payment term cannot exceed the owner’s life expectancy
- Naming the state as beneficiary – the State of Tennessee must be listed as the primary beneficiary after the spouse, up to the amount Medicaid pays for care
If any of these requirements are not met, TennCare will treat the annuity as a gift or disqualifying transfer and impose a penalty period before benefits can start. That is why professional guidance is critical.
Why Families Use Medicaid Annuities
For married couples, a Medicaid annuity can protect the financial security of the healthy spouse (called the community spouse). Instead of forcing the couple to spend down nearly all of their joint savings, the community spouse can convert the excess into an income stream that supports their own needs at home.
For single individuals, a Medicaid annuity can sometimes be part of a last-minute planning strategy, but it must be structured carefully to comply with the five-year lookback period.
Common Misunderstandings with Medicaid Annuities
Many people assume that buying a regular annuity from a financial advisor will help with Medicaid planning. Unfortunately, most commercial annuities do not meet TennCare’s strict requirements and can make the situation worse.
Others think that the state will take their house if they use a Medicaid annuity. That is not true. The home is generally exempt while the applicant or a spouse lives there. However, the state may recover costs from the estate after both spouses pass away, which is why the annuity should always name the State of Tennessee as the beneficiary only after the spouse.
The Role of the Elder Law Attorney
Because the rules are so precise, families should never try to structure a Medicaid annuity on their own. An elder law attorney in Clarksville who understands both federal Medicaid law and Tennessee’s administrative requirements can ensure that the annuity is properly drafted and that the rest of the couple’s assets are positioned for eligibility.
At Crow Estate Planning and Probate, we often work with financial institutions that specialize in issuing Medicaid-compliant annuities. We coordinate the annuity purchase to help ensure that the community spouse is left with the income and resources they need to live comfortably.
Medicaid Planning Attorneys in Clarksville
A Medicaid annuity is not right for everyone, but for many Clarksville families facing sudden nursing home expenses, it can be a powerful and lawful way to qualify for benefits while protecting assets. With proper legal guidance, it can bring relief during one of life’s most stressful transitions.
If you or a loved one are facing long-term care decisions and want to explore options to protect your assets, contact Crow Estate Planning and Probate, PLC in Clarksville. Our attorneys can walk you through every step of the Medicaid process and help you make confident, informed decisions for your family’s future.
About the Author
John Crow is the founder, owner, and principal attorney of Crow Estate Planning and Probate, PLC. With over a decade of legal experience in the areas of estate planning, probate, conservatorships, guardianships, and business planning, he serves clients in the greater Middle Tennessee and Western Kentucky regions. He obtained his Bachelor of Arts degree in History from Vanderbilt University, then later received his Juris Doctorate from the Cumberland School of Law at Samford University. He is a lifelong Clarksville resident and is honored to have helped so many families over the years. Learn More.
Licensed in Tennessee and Kentucky