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Division of Welfare and Supportive Services F-420 Medical Assistance Manual TRANSFER OF ASSETS 23 Oct 01 MTL 04/23 ANNUITIES F-420 ANNUITIES
An annuity is a contract between an individual and a commercial company in which the individual invests funds and, in return, is guaranteed fixed substantially equal installments for life or a specified number of years.
A determination must be made regarding the purpose of the annuity. The annuity must have an expected return commensurate (equal) with the life expectancy of the beneficiary to be deemed actuarially sound.
If the individual is not expected to live longer than the guarantee period of the annuity, the individual will not receive fair market value and is subject to a transfer of assets penalty.
a. Treatment of Annuities Purchased Prior to October 1, 2000.
An annuity purchased prior to October 1, 2000 is not an available resource if it is annuitized (yields monthly fixed, equal installments for a specified number of years, not to exceed the life expectancy of the customer, or for the life of the customer) and regular returns are being received by the annuitant. The funds received are income in the month received.
If the annuity purchased by the applicant/customer or his/her spouse has not been annuitized it shall be considered an available resource regardless of the irrevocable status.
b. Treatment of Annuities Purchased On or After October 1, 2000.
The purchase of an annuity shall be considered as a transfer of assets without fair consideration unless the following criteria are met:
1. The annuity is purchased from a life insurance company or other commercial company that sells annuities as part of its normal course of business; and
2. The annuity is annuitized for the applicant/customer or his/her spouse; and
3. The annuity is purchased on the life of the applicant/customer or his/her spouse; and
4. The annuity provides payments for a period not exceeding the annuitant’s projected life.