Michigan Modifies Annuity Rules for Medicaid

  Effective with any annuity purchased after September 1, 2005, annuities must meet the following requirements to avoid Medicaid divestment penalties:

• The annuity is commercially issued by a company licensed in the United States and issued by a licensed producer,
• The annuity is irrevocable,
• The annuity is purchased by a Medicaid applicant or the spouse and solely for the benefit of the applicant or spouse,
• The annuity is acutuarily sound and returns the principal and interest within the annuitant’s life expectancy,
• The annuity payments much be in substantially equal monthly payments (starting with the first payment) and continue to for the term of the payout (i.e. no balloon or lump sum payments)

For nursing home patients, this means that annuity payments may increase the patient’s contribution to the nursing home by the amount of the annuity payment.  It may also decrease the amount of income the community spouse can keep for household expenses.  Lastly, it also means that annuities may no longer shelter funds for the beneficiaries of the nursing home patient.

  For advice on annuities and other long term care plans tailored to your particular circumstances, see your Elder law advisor.

Annuity article for Sept 2005