415.19 Transfer of Assets into an Annuity (AAM)

415.19 Transfer of Assets into an Annuity (AAM)

SR 08-17 Dated 02/06 Previous Policy

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An annuity is any instrument which gives the right to receive fixed, periodic payments, either for life or a term of years. Annuities that can be cashed in are considered revocable trusts. *

Disclosure of Annuities

Applicants and recipients must disclose any interests they have in an annuity or the device is considered an asset transferred for less than fair market value (FMV).

The community spouse must disclose any interests they have in an annuity purchased on or after 2/8/06 or the device is considered an asset transferred for less than FMV.

Determination of FMV

The purchase of an annuity by an institutionalized individual is automatically treated as an asset transferred for less than FMV unless the State is named as:

. the primary beneficiary for at least the total amount of medical assistance paid on behalf of the institutionalized individual; or

. the contingent beneficiary after the community spouse, minor, or disabled child. If a representative of such child or spouse disposes of any remaining benefit for less than FMV, the State must then be named as the primary beneficiary.

Annuities purchased by or on behalf of an applicant or recipient of NF/HCBC services on or after 2/8/06 (including settlements of litigation) must meet the criteria of at least one of the three scenarios below to be considered to have received FMV for the transfer.

Scenario 1* Scenario 2 Scenario 3 The annuity is: . irrevocable and non-assignable; . provides payments in equal amounts during the term of the annuity, with no deferral or balloon payments made; and . is actuarially sound using the SSA Life Expectancy Tables in the back of this Chapter. Determine if the expected return on the annuity corresponds with a reasonable estimate of the individual ' s life expectancy. If the average number of years of expected life remaining for the individual: - coincides or exceeds the life of the annuity, the annuity is actuarially sound; or - is less than the life of the annuity, the individual did not receive fair market value for the annuity . The annuity meets the definition of: . an Individual Retirement Annuity; or . a Deemed Individual Retirement Account under a Qualified Employer Plan. See the Glossary for specific defintions. The annuity was purchased with proceeds from either a: . Traditional Individual Retirement Account; . Trust or account created by an employer for the exclusive benefit of his or her employees or their beneficiaries, if that trust: - meets the criteria of a Individual Retirement Account; and - has separate accounting for the interest of each employee or member; . Simplified Retirement Account; . Simplified Employee Pension; or . ROTH Individual Retirement Account. See the Glossary for specific defintions.

* Annuities must meet Scenario 1 or be considered a transfer of assets for less than FMV when the annuity was purchased by the:

. applicant or recipient prior to 2/8/06; or

. non-applicant spouse.

Purchase of an Annuity by the Non-Applicant Spouse

The purchase of an annuity on or after 2/8/06 by the non-applicant spouse is automatically treated as a disposal of an asset for less than FMV unless the State is named as:

. the primary beneficiary for at least the total amount of medical assistance paid on behalf of the institutionalized individual(s); or

. the contingent beneficiary after the minor or disabled child. If a representative of such child disposes of any remaining benefit for less than FMV, the State must then be named as the primary beneficiary.

Assets Transferred into an Annuity for Less Than FMV

Applicants and recipients of the adult categories of financial assistance, NF, and HCBC/CFI who transfer assets into an annuity for less than FMV must serve a penalty period. For more information on penalty periods, see Section 415.23 , Determining and Applying the Penalty Period .