The following is applicable to 1040.020.35 Annuities Resulting in a Transfer of Property, 1040.020.35.10 Irrevocable Period Certain Annuities, and 1040.020.35.15 Irrevocable Life Annuities.
Irrevocable life annuities (in which the MHABD vendor or HCB applicant or participant or their spouse is the owner, and the applicant or participant is the annuitant) purchased on or after February 8, 2006 are not considered as a transfer of property (disposal of assets for less than fair market value) when:
The annuity contract meets the requirement pertaining to the naming of the State as a remainder beneficiary (see 1030.030.10 Determining Eligibility for MHABD Vendor or Home and Community Waiver Services for Annuities That Were Purchased and Began Making Payments on or After April 20, 2010 When There Is a Community Spouse for beneficiary options), and
- The annuity is considered either:
- An individual retirement annuity (according to Sec. 408(b)) of the Internal Revenue Code of 1986 (IRC), or
- A deemed Individual Retirement Account (IRA) under a qualified employer plan (according to Sec. 408 (q) of the IRC).
OR
- The annuity is purchased with proceeds from one of the following:
- A traditional IRA (IRC Sec. 408a); or
- Certain accounts or trusts which are treated as traditional IRAs (IRC Sec. 408 §(c)); or
- A simplified retirement account (IRC Sec. 408 § (p)); or
- A simplified employee pension (IRC Sec. 408 §(k)); or
- A Roth IRA (IRC Sec. 408A).
To determine that an annuity is established under any of the provisions of the Internal Revenue Code that are referenced above, rely on verification from the financial institution, employer, or employer association that issued the annuity. The burden of proof is on the institutionalized individual or his or her representative to produce this documentation. Absent such documentation, the purchase of the annuity will be considered a transfer for less than fair market value which is subject to a penalty.