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Can Annuities Be Used To Pay For Assisted Living?
Date Updated: July 26, 2024
Written by:
Rachel Lustbader is a writer and editor with a background in healthcare and technology. Her work has been published on websites including HealthCare.com, BiteSizeBio.com, BetterHelp.com, Caring.com, and PayingforSeniorCare.com. She studied health science and public health at Boston University.
Both of Rachel’s grandmothers had very positive experiences in senior living communities, and Rachel saw firsthand the impact that kind, committed caregivers and community managers can have on seniors’ and their family members’ lives. With her work at Caring, Rachel hopes to help other families find communities, caregivers, and at-home products that benefit elderly loved ones and make life less stressful for family caregivers
Annuities can pay for assisted living care. Insurance companies sell annuities in exchange for a lump sum of cash or a monthly payment. After you buy an annuity, you receive regular payments from the insurance company based on the schedule in your annuity contract.
What Are the Types of Annuities for Long-Term Care?
Types of annuities for long-term care include an immediate annuity and a deferred long-term care annuity. With an immediate annuity, you make one payment to receive guaranteed income for the contract term. These funds could cover part of the cost of assisted living, but the IRS considers the money taxable income.
Deferred long-term care annuities create an extended source of income along with an additional, separate income stream for long-term care. The latter portion goes toward your assisted living payments right away. Then, you gain access to the deferred income source in the future or leave it to heirs in your estate plan. You rarely pay taxes on income from long-term care annuities.
Who Qualifies for a Long-Term Care Annuity?
Individuals younger than 85 and meet the plan’s health requirements qualify for a long-term care annuity. It’s also important to review how buying this type of annuity could impact your Medicaid coverage, especially if you live in a state that provides Medicaid waivers for long-term care costs.