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.
If you have a senior client who is looking to qualify for Medicaid, an existing annuity may post a problem. Some annuities are considered a countable asset, and others may be deemed a divestment for Medicaid purposes. In certain cases, your client’s annuity may be sold on the secondary market. Then, they can use the funds from the sale to purchase a Medicaid Compliant Annuity and seek Medicaid eligibility. When you work with us, you can take advantage of our complimentary annuity valuation service to get competitive offers for your client and earn a commission in the process! Here’s what you can expect from the secondary annuity market.
Step 1: You send us your client’s contract.
First, send us your client’s contract, and we’ll review it to determine if it can be sold on the secondary market. Many seniors purchase annuities to provide them income during their retirement years. Those are the most common types of annuities we evaluate. However, in order to be sold on the secondary market, the contract must meet these requirements:
- Funded with non-qualified, post-tax dollars
- Annuitized and currently making regular payments
- No cash or surrender value option available
- Not an IRA
- Making payments for a certain, guaranteed period
OR include a guaranteed cash benefit payout option upon the owner’s death
Read more: What is a Medicaid Compliant Annuity?
Step 2: We assess the value of the contract and present multiple offers.
Once we verify the annuity meets these requirements, we’ll send the contract details to secondary market companies that regularly purchase annuities. Their resulting offer letters will help us assess the contract’s value. We typically compile at least three offers in order to establish the annuity’s Fair Market Value and make sure the transaction will not be penalized for Medicaid purposes. If the contract meets certain criteria, our sister company, Krause Annuity Services, may also make a bid. When all the offers are assembled, we’ll send them to you to present to your client.
Step 3: Your client accepts an offer and completes the paperwork.
Upon receiving the offers, your client may choose one to accept, and our office will gather the necessary paperwork to complete the sale. In most cases, the secondary market company will take over the ownership, payee, and beneficiary designations of the annuity. Once all the documents have been completed and signed, our office will send them to the insurance company and follow up until all applicable changes have been completed.
Step 4: Your client receives the cash, and you get paid.
Finally, the secondary market company will release the payment to your client, either by wiring the funds or mailing a check. Plus, when your client sells their non-compliant annuity through our office, you can earn a commission of 5% of the sale price! As the new owner, payee, and beneficiary, the secondary company is now in control of the contract and receives all remaining payments as well as any death benefit.
The timing of this process can vary depending on the processing times of the secondary market company and whether any additional information is required. However, when you work with us, the average timeframe for the entire process, from start to finish, is 5 to 14 business days. On a case-by-case basis, our office may be able to release the payment to your client prior to completion in order to meet specific deadlines for Medicaid eligibility.
If your client has a non-compliant annuity and is looking to qualify for Medicaid, contact our team at The Krause Agency to find out if their annuity can be sold on the secondary market.