Annuities

The DRA addressed the treatment of annuities and provided an analysis of when purchase of an annuity can be considered a transfer subject to penalty by Medicaid. The following bulleted material covers only a small portion of this very complicated rule. Please seek legal advice if you are considering a Medicaid application and you own any annuity products.

• After November 1, 2009, the purchase of an irrevocable, non-assignable annuity providing for equal payments with a payback within the life expectancy of the annuitant will not be a transfer subject to penalty. The income derived from this type of annuity is countable in the Medicaid income budgeting process.
• The State must be named as the remainder beneficiary on annuities or the purchase will be considered to be a transfer of an asset for less than fair market value. This change requires both the Medicaid applicant and the Medicaid applicant’s non-recipient spouse, if applicable, to name the state as beneficiary for payment of whatever the state spends on the recipient’s Medicaid.

Other Issues Under DRA

The DRA adds specific language to address promissory notes, “life estates” in real estate, and undue hardship exceptions to the rules, among other issues. One should seek legal counsel to address any of the issues that may come up as a result of the State’s implementation of the DRA.