Medicaid Planning and Annuities: Assessing Treatment of Annuities Under Federal and State Medicaid Planning Rules

While there are some federal regulations regarding the use of annuities in Medicaid planning, state law governs whether an annuity is Medicaid compliant. State rules regarding Medicaid-compliant annuities are complex and difficult for family members involved in the Medicaid planning process to understand.

Annuities that meet the requirements of the Deficit Reduction Act of 2005 (DRA) can be used to convert an otherwise countable resource into an income stream for the community spouse or the applicant.

Under IRS regulations, an IRA or 401K account holder can direct up to 25% of the qualified funds into a qualified longevity annuity contract (QLAC) which funds are then exempt from the required minimum distribution (RMD) rules. However, QLACs are not a “Medicaid-compliant annuity,” which can be excluded from consideration.

Listen as our authoritative panel of elder law attorneys discusses common types of annuities owned by individuals and families, and analyzes how different types of annuities will be treated under federal and state Medicaid planning rules. The panel will also discuss what if anything can be done with annuities in order to obtain Medicaid eligibility.

1. Overview of types of annuities
   1. Immediate annuities
   2. Deferred annuities
   3. Medicaid-compliant annuities
   4. Qualified longevity annuities
2. Tax treatment: qualified vs. non-qualified annuities
3. Pros and cons for Medicaid planning

The panel will review these and other key issues:

• What types of annuities are considered a resource that must be used to pay for nursing home care?
• What state law requirements are generally imposed to make an annuity Medicaid compliant?
• What are the retirement benefits of QLACs and how do they fit into Medicaid planning?