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Annuities are often used to produce a monthly stream of income for a fixed period or even for life. Many people use annuities as a form of retirement account to provide a stream of income in their golden years. However, if your annuity is not properly created it may prevent you or your spouse from becoming eligible for Medicaid benefits when the need arises.

In New York, generally, a Medicaid applicant may not have countable assets that exceed the permitted resource amount limits (2016 limits are $14,850 for individuals; $21,750 for married couples seeking home care, and a sliding scale of $74,820 – $119,220 for a community spouse where the other spouse is institutionalized). If your annuity is not properly created, and has a value that exceeds the available resource limits, you or your spouse will likely be ineligible to obtain needed Medicaid benefits.

Pursuant to the Deficit Reduction Act of 2005 (“DRA”), annuities must meet stringent requirements which would allow an applicant to be Medicaid eligible. The DRA mandates that (1) the annuity be irrevocable; (2) the State must be named as a successor beneficiary (or secondary beneficiary if the applicant is married and the spouse is named as the primary beneficiary); (3) they must be actuarially sound in that they pay back the entire amount within the applicant’s actuarial life expectancy; (4) they provide for equal payments with no deferral or balloon payments; and (5) they do not terminate upon the applicant’s death.

If your annuity (or your spouse’s annuity) does not meet the above mentioned requirements, it will be considered an available resource, and will likely prevent you or your spouse from becoming Medicaid eligible. If you or your spouse has an annuity that does not comply with the DRA’s stringent requirements, not all is lost. There are planning techniques available, such as selling your current non-DRA compliant on the second market, and then using the proceeds to obtain a new DRA compliant annuity. Such planning can be complex, and thus should be conducted by an experienced elder law attorney.

For further information regarding your current and/or future annuities, please do not hesitate to contact elder law and medicaid planning attorney Giannasca & Shook, PLLC at (914) 872-6000.