IM-48 May 14, 2020; IM-26 March 15, 2012
Annuities will not be considered as an available resource or subject to a transfer penalty for either the community or institutionalized spouse applying for, or receiving MHABD vendor or HCB benefits if the annuity meets all of the following requirements:
- Is owned by the community spouse or institutionalized spouse
- Is irrevocable and non-assignable
- Is actuarially sound as measured against the Period Life table published by the Office of the Chief Actuary of the Social Security Administration based on the life expectance of the annuitant
- Provides equal or nearly equal payments for the duration of the annuity with no deferral and no balloon payments; and
- Provides for the appropriate beneficiary options. Beneficiary means the person that receives the funds from the annuity after the death of the annuitant. There are three qualifying beneficiary options:
Option one – for annuities owned by the community spouse:
- The annuity must provide that the institutionalized spouse is the primary beneficiary in the event of the community spouse’s death; and
- The annuity must provide that in the event of the death of the institutionalized spouse the state of Missouri is named as the secondary or contingent beneficiary for the amounts of medical assistance (can also state Medicaid or MO HealthNet) expended by the state of Missouri on the institutionalized spouse’s behalf. The annuity beneficiary designation must contain the following language to ensure that the state of Missouri is repaid – “Proceeds of this annuity shall be paid to the State of Missouri for the amount of Medicaid funds expended on behalf of (name of the institutionalized spouse).”
Option two – for annuities owned by the institutionalized spouse:
- The annuity must provide that the State of Missouri is the primary beneficiary for at least the total amount of medical assistance (can also state Medicaid or MO HealthNet) paid on behalf of the institutionalized individual. The annuity must contain the following language to ensure that the state of Missouri is repaid – “Proceeds of this annuity shall be paid to the State of Missouri for the amount of Medicaid funds expended on behalf of (name of the institutionalized spouse)”; or
Option three – for annuities owned by the institutionalized spouse
- The annuity must provide that the State of Missouri is named as secondary or contingent beneficiary after the community spouse or minor or disabled child and is named as primary beneficiary if the community spouse, minor or disabled child, or a representative of such child disposes of any remainder for less than fair market value. The annuity beneficiary designation must contain the following language to ensure that the state of Missouri is repaid – “Proceeds of this annuity shall be paid to the State of Missouri for the amount of Medicaid funds expended on behalf of (name of the institutionalized spouse).”
The annuity may be purchased from the institutionalized spouse’s share of assets for the community spouse because there is no transfer penalty between spouses. The community spouse’s annuity income stream cannot be considered an available resource in determining an institutionalized spouse’s eligibility for MHABD vendor and HCB benefits.
NOTE: Annuity payments are included as income to the spouse who is entitled to receive the payments from an annuity due to ownership interest and whose life expectancy is used to calculate the income payment unless the spouse receiving the payments is named as the payee and has no fiduciary obligation to use the funds for the sole benefit of the other spouse (such as acting as power of attorney/attorney in fact, guardian, conservator, or public administrator). If the community spouse is acting in a fiduciary capacity on behalf of the institutionalized spouse, the annuity payments legally belong to the institutionalized spouse, unless the document or court order giving the community spouse these fiduciary powers allows the community spouse to use the funds free and clear of any fiduciary obligations to the institutionalized spouse. If the POA/Attorney-in-fact documentation does not specify, the payments are attributable to the institutionalized spouse.
EXAMPLE: Mollie M entered a nursing facility on September 5, 2019. She is married and has 2 minor children. She and Mr. M purchased an annuity listing her as the owner and annuitant, and Mr. M is Mollie’s attorney-in-fact. If the power of attorney gives Mr. M the power to access Mrs. M’s annuity and use the money as he sees fit to provide for the family while Mrs. M is incapacitated, the annuity payments belong and are attributable to the community spouse, Mr. M.
EXAMPLE: Margaret M entered a nursing facility on September 5, 2011. She is married and her spouse remains in the community. Mr. and Mrs. M had five separate certificates of deposit with a total value of $680,000. On September 1, 2011, Mr. and Mrs. M cashed in all of their certificates of deposit and purchased an irrevocable life annuity for $680,000 with Mr. M as the owner and annuitant. Mr. M is 70 years old. He receives monthly annuity payments of $ 4,800 per month. The policy provides for equal or nearly equal payments throughout the duration. The annuity policy is actuarially sound (13.73 = (life expectancy at the time the annuity was purchased) x 12 (months) x $4,800 (monthly payments) = $790,848). Mr. M named Mrs. M as the primary beneficiary and the State of Missouri as the contingent/remainder beneficiary in an amount equal to the amount of MO HealthNet payments made on the behalf of Mrs. M, the institutionalized spouse.
- The annuity is irrevocable, non-assignable, has no cash surrender value, and is actuarially sound.
- MO is a contingent beneficiary for the amount of Medicaid funds expended on behalf of the institutionalized spouse.
The income stream is not considered an available resource to the institutionalized spouse. The purchase of the annuity is not considered as a transfer of property.
Payments received by Mr. M will be included as his income in the allotment computation.
EXAMPLE: Mildred purchased an annuity similar to the example above. She became institutionalized. Mildred is the owner and the annuitant. Mildred’s (community spouse) is her Power of Attorney/attorney-in-fact.
- The annuity is irrevocable, non-assignable, has no cash surrender value, and is actuarially sound.
- MO is a contingent beneficiary for the amount of Medicaid funds expended on behalf of Mildred, (the institutionalized spouse).
The income stream is not considered as an available resource to Mildred. The purchase of the annuity is not considered as a transfer of property.
Because Mildred’s spouse has a fiduciary obligation to use the funds received monthly from the annuity for her benefit, the income legally belongs to and must be counted as income to Mildred.
Requests for Interpretation of Policy must always be submitted through supervisory channels to the Policy and Procedure Collaboration Portal.
Items necessary before a policy review request may be submitted to Program & Policy:
- a complete copy of the annuity,
- a copy of the annuity application page, and (if applicable)
- a copy of the power of attorney/attorney-in-fact documents, or court order.
Designated staff will attach these documents to the IM-14 Request for Interpretation of Policy, and forward them to the Program & Policy Unit for review.
Refer to Policy and Procedure site instructions for information on how to enter Requests for Interpretation of Policy.