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way the funds from the annuity will be paid out. It involves choosing the amount of each payment, how often payments will be made, and the length of time over which the payments will be made. Revocable vs Irrevocable Annuities If the terms of the annuity contract allow the fund to be surrendered, it is considered revocable. If the terms of the annuity contract do not allow the fund to be surrendered, it is considered irrevocable. 16.12.2 Treatment of Annuities as Assets or Income

Asset Treatment of Annuities Annuities that can be surrendered (revocable annuities) are considered available, countable assets. The countable asset value of an annuity that can be surrendered is determined as follows: • Total deposits made to the annuity • Plus any earnings on the deposits not previously paid out • Minus any earlier withdrawals and any surrender costs charged for the withdrawal. Income tax withheld or tax penalties for early withdrawal are not deducted from the surrender value. Annuities that cannot be surrendered (irrevocable annuities) are considered unavailable assets. For long-term care cases, irrevocable annuities must be evaluated for divestment (see SECTION 17.2.6.14 IRREVOCABLE ANNUITIES). An irrevocable annuity is considered an unavailable asset on the date the settlement option was made final (typically the annuitization date). Income Treatment of Annuities Annuity payments are counted as unearned income if the annuity is an unavailable asset. Annuity payments are not counted as unearned income if the annuity is an available asset. 16.12.3 Long-Term Care Annuity Disclosure and Remainder Beneficiary Designation Requirements For long-term care cases, annuities purchased or substantively changed after January 1, 2009, are subject to annuity disclosure (see SECTION 16.12.3.1 ANNUITY DISCLOSURE) and remainder beneficiary designation (see SECTION 16.12.3.2 REMAINDER BENEFICIARY DESIGNATION) requirements. Annuities purchased prior to January 1, 2009, that have not been substantively changed since that date are not subject to LTC annuity disclosure or remainder beneficiary assignment requirements, but these annuities must still be reported and evaluated for their availability as income or assets. The following actions are considered substantive changes: • Additions of principal • Elective withdrawals • Requests to change the distribution of the annuity • Elections to annuitize the contract • A change in ownership • Any other non-routine action not listed below The following actions are not considered substantive changes: