There is a lot of confusion regarding Medicaid annuities. Many financial sales involving annuities are motivated in part because assurances are made that the annuities “are protected from Medicaid”. Sadly, much of this advice is based upon misinformation. The Medicaid annuity rules are found at Bridges Eligibility Manual (BEM) 401 and it provides that purchasing an annuity on or after September 1, 2005 is a transfer for less than fair market value unless the annuity:
- Is commercially issued by a company licensed in the U.S. and issued by a licensed producer, and
- Is irrevocable, and
- Is purchased by an applicant or recipient for Medicaid or their spouse and is solely for the benefit of the applicant or recipient or their spouse, and
- Is actuarially sound and returns the principal and interest within the annuitant’s life expectancy, and
- Payments must be in substantially equal monthly payments and continue for the term of the payout (no balloon or lump sum payment).
Also, for a single person, the State of Michigan must be named as the remainder beneficiary for an amount at least equal to the amount of Medicaid benefits provided.
If you are considering purchasing an annuity that is supposedly a Medicaid compliant annuity, be sure to consult with an experienced elder law attorney first. It may just help you avoid a significant financial mistake.