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Effective: December 1, 2006 |
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19.25.30.05ar1 - Annuity Transfers (Archive) |
Archived: August 1, 2008 |
There are several situations when an annuity needs to be evaluated as a transfer for MA/GAMC purposes:
l The annuity has been annuitized, within the transfer lookback period, during the month of application or while the client is an enrollee, by a client or a client’s spouse.
l Annuities purchased on or after March 1, 2002 do not meet specific criteria.
At this time there are no transfer provisions for MinnesotaCare or GHO.
Identifying Annuity Transfers.
Determining the Uncompensated Value – Annuities.
The three situations in which a transfer into an annuity must be reviewed are:
l Annuities purchased on or after March 1, 2002, that do not meet all of the following requirements are improper transfers:
n The annuity is a commercial annuity purchased from an insurance company or financial institution regulated or licensed by a government agency.
n The principal and interest payments are made in equal monthly amounts.
n The principal and interest payments begin at the earliest possible date after the payment option is selected.
If any one of the requirements is not met, consider the purchase of the annuity to be an improper transfer. Calculate the uncompensated value as of the date of annuitization.
l All annuities annuitized by the client or the client’s spouse which fall into the transfer lookback period or while the client is an applicant or enrollee.
l An annuity has been sold, assigned or has had part of the income stream sold.
Do not consider the transfer of funds into an annuity as improper if:
l The client or spouse is the owner of an annuity that has not yet been annuitized. This means it is in the accumulation phase. See Annuities to determine the counted value.
l A spouse purchases an annuity and names the other spouse as the sole annuitant.
Note: The cash value as of the date of annuitization must be expected to be returned to the spouse during his/her lifetime. Therefore, no other person may be named as beneficiary.
Determining Uncompensated Value - Annuities
Annuities that have been determined to be a transfer must be evaluated to determine whether the transfer was made for less than fair market value.
Determining fair market value is based on whether the client or spouse is likely to receive a return of the value of the transfer during his or her lifetime, depending on which person made the transfer.
Apply the following steps to determine the uncompensated value:
1. Determine the life expectancy of the owner of the annuity, not the annuitant, on the date of the transfer. To find the life expectancy figure, compare the age and sex of the annuity owner to the Annuities Life Expectancy Table.
Exception 1: When an LTC spouse purchases an annuity and names the community spouse as the sole annuitant, determine the life expectancy of the LTC spouse.
Exception 2: Use a period shorter than the estimated life expectancy found in the Annuities Life Expectancy Table if both of the following are met:
n The client has a medical condition that would shorten his or her life expectancy.
n The shortened life expectancy was diagnosed before funds were placed in the annuity.
If it appears the client has such a condition, request a physician's statement documenting:
n The medical condition.
n The date of diagnosis.
n The life expectancy of the client.
Example:
Rudolph was 72 years old when he annuitized his annuity last month.
Action:
His life expectancy figure based on his being male and age 72 is 10.59 years.
Example:
Tatiana was 25 years old when she annuitized her annuity 15 months ago.
Action:
Her life expectancy figure based on her being a female and 25 years old is 59.55 years.
Example:
Salvador is 80 years old. He entered an LTCF a month ago and applied for health care a week ago. Salvador reported that he purchased an immediate annuity a week after he entered the LTCF. The worker received a DHS-1503 indicating that Salvador is terminally ill.
Action:
The worker requested Salvador return a doctor’s statement indicating what his medical condition is, when it was diagnosed and an estimated life expectancy.
Salvador’s doctor statement indicated he was diagnosed prior to entering the LTCF and that he was expected to live only another 12 months.
Action:
Based on this finding, Salvador’s annuity transfer will use his shortened life expectancy of one year, rather than the 7.04 years that correlates with his sex and current age. Had the diagnosis been made after the purchase of the annuity, his current age would be used in the calculation.
2. Determine the total annual payments the annuitant will receive from the settlement option. Multiply the amount of each annuity payment by the number of payments in a year to get the total annual payment.
3. Determine the expected value of payments that will be received in the lifetime of the owner. Multiply the total annual payments (Step 2) by the life expectancy figure (Step 1).
4. Compare the total value of payments of the settlement option to the cash value on the date of the transfer.
l If the cash value exceeds the settlement option (Step 3), the difference is the uncompensated value. This is the amount not expected to be returned during the client's lifetime.
l If the cash value is less than or equal to the settlement option (Step 3), the value of the annuity will be returned to the client in his or her estimated lifetime.
5. Subtract payments the client has already received from the uncompensated value of the annuity as the client was already compensated for this amount.
6. Finally, refer to Transfers to determine ineligibility based on the uncompensated value.