Working with Pre-Existing Annuities

man signing papers with pen

Disclaimer: With Medicaid, VA, and insurance regulations frequently changing, past blog posts may not be presently accurate or relevant. Please contact our office for information on current planning strategies, tips, and how-to's.

Annuities are one of the most popular investment vehicles available. However, many clients will own old annuities that are non-DRA compliant which will likely make them ineligible for Medicaid. If the annuity does not meet the requirements as outlined in the Deficit Reduction Act of 2005, which requires that an annuity must be irrevocable, non-assignable, actuarially sound, make equal payments, and name the state as the beneficiary, the client will never qualify for Medicaid.

Most annuities allow the owner to change parties related to the contract, the owner, and beneficiary.  This allows companies such as J.G. Wentworth to purchase the annuities on the secondary market for cash.  In order to qualify for Medicaid, an individual typically must have $2,000.00 or less in assets.  Thus, if they have an annuity that is not DRA compliant, the annuity will have value above the $2,000 limit which will result in preventing the person from being able to qualify for Medicaid.

If you encounter this situation, note that The Krause Agency offers complimentary annuity valuation service.  At no charge, we will analyze your clients’ preexisting annuity to determine whether it is Medicaid compliant.  If it is non-DRA compliant, we will perform a valuation process to determine its Fair market value and sell it on the secondary market.  The entire process from valuation to change of ownership can typically be completed in as little as 1-3 weeks.