Annuities and the Annuitizing Process
TennCare/Medicaid treats annuities in one of two ways: 1. Income or 2. Resource. In a previous blog post, RETIREMENT ACCOUNTS OF THE COMMUNITY SPOUSE, we discussed that resources are either considered countable or exempt by TennCare/Medicaid. A TennCare/Medicaid applicant can transform an annuity, or retirement account, from a countable resource into an exempt resource. However, the process to do this is both time and rule sensitive.
First, an annuity, or asset being annuitized for Medicaid purposes, must be set up at a specific time before an application for TennCare/Medicaid can be made. Second, the annuity must meet the following five requirements:
1. Irrevocable, 2. Non-Assignable, 3. Actuarily Sound (pays out within the annuitant’s life expectancy), 4. Produce Periodic Payments of Equal Amounts, 4. Have No Cash Value (i.e. principal not available), and 5. TennCare/Medicaid must be the first remainder beneficiary. Regarding this the fifth requirement, even when a person dies before the annuity is fully paid out, TennCare/Medicaid can only recover up to what was paid out in benefits for the applicant.
A misstep in this area can lead to losing desired use and access of the resource. Additionally, TennCare/Medicaid may consider the transaction an improper gift. If the above requirements are not met, it can create months of ineligibility for TennCare/Medicaid.
Annuities are a very important part of long-term care planning, but it is very easy to have them cause a problem. If you have any questions about Medicaid compliant annuities, please contact Bryson Eubanks at Kane and Crowell Family Law Center at beubanks@kane-law.com or by phone at (615) 784-4800.
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Annuities, Retirement Planning, Tenncare/Medicaid
