The Medicaid program's treatment of annuities is one of the biggest sources of confusion for my clients.
So...if you have an annuity and you apply for Medicaid, is that going to be a problem? The answer is the same as it is for most legal questions: "It depends".
The current rule regarding annuities, which has been in place since February of 2006, is that an annuity is not a countable asset for Medicaid eligibility purposes if the following requirements are met:
1. "Actuarilly sound". In other words, the payment term of the annuity cannot exceed the annuity owner's life expectancy. Furthermore, the grand total of the annuity's planned payments cannot exceed the cost of the annuity.
2. Non-transferable. Pursuant to the annuity contract, the annuity owner must be prohibited from transfering ownership of the annuity to another person.
3. Irrevocable. Except for the regular annuity payments, the annuity owner cannot withdraw funds from the annuity.
4. State as Beneficiary. Here's the one that my clients find the most frustrating; the State must be the primary beneficiary upon the annuity owner's death, up to the cost of care that the State has provided for the annuity owner. If there is a spouse or a minor or disabled child, then the State must be the secondary beneficiary.
The State is generally wary of annuities and they will strictly apply this test. So keep this information in mind if you are a senior and considering the purchase of an annuity.