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If an annuity is not purchased from a company that regularly sells such financial products or not purchased from a non-profit organization, the uncompensated amount is the entire purchase price. An example is the purchase of a private annuity from a family member. The purchase of a private annuity is a violative transfer of property. If the annuity pays/will pay a lump sum balloon payment or if the total annual payments vary by more than five percent, then the uncompensated amount is the entire amount of the purchase price. If an annuity does not meet any of the criteria that render it automatically a violative transfer of property, then a determination of whether adequate consideration will be received must be made by the DFR. The value of the expected income is determined by multiplying the monthly income by the individual's life expectancy (or term of the annuity, if shorter). Convert years to months using the figure for the person's age at the time of purchase. The uncompensated value is the difference between the purchase price of the annuity and the amount of income expected to be received by the purchaser or their spouse, during the lifetime of the annuitant, or term of the annuity if shorter. Example 1: A female applicant, age 85, purchases a $50,000 immediate annuity from a life insurance company. She elects to receive income payments of $375 per month. Per the Life Expectancy Table for females, her life expectancy is 6.63 years or 79.56 months. $375 x 79.56 = $29,835. The applicant is not expected to receive in payments what she transferred in principle. The uncompensated value is $20,165.

Example 2: Male applicant, age 60, purchases a $100,000 annuity on June 1, 2002, from an insurance company and will receive equal income payments of $500 per month. Per the Life Expectancy Table for males, his life expectancy is 18.42 years or 221.04 months. $500 x 221.04 = $110,520. The applicant is expected to receive income greater than the purchase price. Adequate consideration will be received.

Example 3: Male applicant, age 90, purchases a $20,000 annuity from an insurance company on July 1, 2002, and will receive 45 payments of $250 per month. Since the annuity was purchased after June 1, 2002, and the individual will receive a balloon payment, the uncompensated amount is $20,000 – the full purchase price of the annuity. For annuities that have been annuitized prior to June 1, 2002, adequate consideration was (will be) received if the annuity will return to the individual the full purchase price within the individual’s life expectancy (or within the contract’s specified time period if shorter than the life expectancy). These annuities do not have to be purchased from a commercial company or a non-profit organization. The total annual payments do not have to be equal and lump sum or deferred payments toward the end of the individual’s life expectancy may be made. The uncompensated amount is the difference between the purchase price and the amount that the annuity will return within the annuitant’s life expectancy. For annuities purchased, annuitized, or where certain specified changes were made on or after