| TO: | ALL COUNTY OFFICES |
| FROM: | JANEL R. LUCK, DIRECTOR |
| SUBJECT: | ANNUITIES AS AN AVAILABLE RESOURCE OR TRANSFER OF PROPERTY: MANUAL REVISION #37 SECTIONS 1030.030.00, 1030.030.05, 1030.030.10, 1030.030.10.05, 1030.030.10.10, 1030.030.10.15, 1040.020.35, 1040.020.35.05, 1040.020.35.10, 1040.020.35.15 |
DISCUSSION:
Senate Bill 577 (2007) amended Section 208.212 RSMo changing the definition used to evaluate an annuity as an available resource or transfer of property. Effective August 28, 2007, the income stream from an annuity from which a primary beneficiary (or annuitant) receives monthly income is EXCLUDED as an available resource, if the annuity:
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is actuarially sound as measured against the life expectancy tables published by the Office of the Chief Actuary of the Social Security Administration. These tables may be accessed at http://www.ssa.gov/OACT/STATS/table4c6.html
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provides equal or nearly equal payments for the duration of the annuity and excludes balloon-style final payments,
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names the State of Missouri as the secondary or contingent beneficiary ensuring payment of MO HealthNet expenditures if the individual predeceases the duration of the annuity, AND
- names and pays the MO HealthNet participant as the primary beneficiary (or annuitant).
EXAMPLE: Emily Miller bought a $40,000 irrevocable annuity on September 25, 2007. Emily is the owner of the annuity and the annuitant. The annuity is actuarially sound. It provides equal payments and names the State of Missouri as contingent/remainder beneficiary. Emily applied for MO HealthNet for the Aged, Blind, and Disabled. Since the annuity is irrevocable, it has no CSV. Because the annuity meets the requirements, the income stream from the annuity is not an available resource to Emily. Budgeting of income from the annuity must be evaluated. Use policy in Section 0815.030.05 to determine whether or not income should be counted. In this situation, the income from the annuity is considered countable unearned income to Emily.
If the above four conditions are not met, the income stream of the annuity is considered as an available resource to the primary beneficiary (or annuitant).
DETERMINING THE VALUE OF THE INCOME STREAM OF AN ANNUITY
The value of the income stream from the annuity is the amount of the remaining guaranteed payments, unless there is documentation that the annuity could not be sold for that amount to a third party. If the annuity cannot be sold for the amount of the remaining guaranteed payments, its value is the amount it could be sold for. To determine the amount the annuity could be sold for, the annuitant may:
provide documentation from the company that issued the annuity verifying the amount that they will pay for the annuity if sold to them; or
- obtain the value of the annuity on the open market if the issuing company will not buy the annuity. (Companies that buy annuities can be located through an Internet search.)
EXAMPLE: Margaret Mabry entered a nursing facility on September 5, 2007. She is married and her spouse remains in the community. The Mabry's had five separate certificates of deposit with a total value of $680,000. On September 1, 2007, the Mabry's cashed in all of their certificates of deposit and purchased an irrevocable life annuity for $680,000 with Mr. Mabry as the owner and primary beneficiary (or annuitant). Mr. Mabry is 70 years old. His life expectancy is 12.98 years. He receives monthly annuity payments of $4,800 per month. The annuity policy is actuarially sound (12.98 x 12 x $4,800 = $747,648). The policy provides for equal or nearly equal payments throughout the duration. Mr. Mabry named the State of Missouri as the remainder beneficiary in an amount equal to the amount of MO HealthNet payments made on the behalf of the primary beneficiary (or annuitant). Since the policy is irrevocable, it has no cash surrender value. However, the policy does not name the MO HealthNet participant (Margaret Mabry) as the primary beneficiary (or annuitant). Therefore, the income stream is considered an available resource to Mr. Mabry. When contacted, the company that issued the annuity stated the value of the income stream is $500,000. The amount of $500,000 is counted as an available resource to Mr. Mabry.
ANNUITIES RESULTING IN A TRANSFER OF PROPERTY
Annuities are considered a form of a trust and are subject to a sixty month look back period. If the current value of an annuity plus the amount of monthly payments the beneficiary has already received do not equal the amount of the premiums paid to purchase the annuity, a transfer of property has occurred.
EXAMPLE: Darlene Meyer, age 80, purchased a single premium, irrevocable annuity for $15,000 in May 2006. Ms. Meyer is the owner and primary beneficiary (annuitant). The annuity makes small quarterly payments of $25 for 5 years and then a final balloon-style payment. Ms. Meyer named her niece as remainder beneficiary. Ms. Meyer entered a skilled nursing facility in June 2007 and applied for MO HealthNet for the Aged, Blind, and Disabled in July 2007. The State of Missouri is not named as contingent/remainder beneficiary, the annuity does not pay out in equal or nearly equal payments, and it does not exclude balloon-style final payments. Therefore, the income stream of the annuity is considered an available resource. Ms. Meyer furnished documentation that she cannot sell the annuity for the amount of the remaining guaranteed payments. Instead, she can sell it for $300. The $300 is an available resource to Ms. Meyer. However, since Ms. Meyer can sell the annuity for only $300, a transfer of property occurred. The amount transferred is the amount paid for the annuity ($15,000) minus the value of the annuity ($300) and the amount of payments already received ($100). The eligibility specialist determines that Ms. Meyer transferred $14,600.
If the income stream of an annuity from which a primary beneficiary (or annuitant) receives monthly income is excluded as an available resource, transfer of property provisions do not apply. Refer to Section 1030.030.10.10 and Section 1030.030.10.15 for guidance on determining if the income stream of the annuity is excluded as an available resource.
MANUAL UPDATES
Sections 1030.030.00, 1030.030.05, 1030.030.10, 1030.030.10.05, 1030.030.10.10, 1030.030.10.15, 1040.020.35, 1040.020.35.05, 1040.020.35.10, and 1040.020.35.15 of the Income Maintenance Manual are updated.
NECESSARY ACTION:
- Review this memorandum with appropriate staff.