"Annuitant" means a person or entity that receives the income from an annuity.
"Annuity" means a policy, certificate or contract that is an agreement between two parties in which one party pays a lump sum to the other, and the other party agrees to guarantee payment of a set amount of money over a set amount of time. The annuity may be purchased at one time or over a set period of time and may be bought individually or with a group. It may be revocable or irrevocable. The party guaranteeing payment can be an:
(1) Individual; or
(2) Insurer or similar body licensed and approved to do business in the jurisdiction in which the annuity is established.
"Beneficiary" means an individual(s) designated in the trust who benefits from the trust. The beneficiary can also be called the grantee. The beneficiary and the grantor may be the same person.
"Designated for medical expenses" means the trustee may use the trust to pay the medical expenses of the beneficiary. The amount of the trust that is designated for medical expenses is considered an available resource to the beneficiary. Payments are a third party resource.
"Disbursement" or "distribution" means any payment from the principal or proceeds of a trust, annuity, or life estate to the beneficiary or to someone on their behalf.
"Discretion of the trustee" means the trustee may decide what portion (up to the entire amount) of the principal of the trust will be made available to the beneficiary.
"Exculpatory clause" means there is some language in the trust that legally limits the authority of the trustee to distribute funds from a trust if the distribution would jeopardize eligibility for government programs including Medicaid.
"For the sole benefit of" means that for a transfer to a spouse, blind or disabled child, or disabled individual, the transfer is arranged in such a way that no individual or entity except the spouse, blind or disabled child, or disabled individual can benefit from the assets transferred in any way, whether at the time of the transfer or at any time during the life of the primary beneficiary.
"Grantor" means an individual who uses his assets or funds to create a trust. The grantor may also be the beneficiary.
"Income beneficiary" means the person receiving the payments may only get the proceeds of the trust. The principal is not available for disbursements. If this term is used, the principal of the trust is an unavailable resource.
"Irrevocable" means the legal instrument cannot be changed or terminated in any way by anyone.
"Life estate" means an ownership interest in a property only during the lifetime of the person(s) owning the life estate. In some cases, the ownership interest lasts only until the occurrence of some specific event, such as remarriage of the life estate owner. A life estate owner may not have the legal title or deed to the property, but may have rights to possession, use, income and/or selling their life estate interest in the property.
"Principal" means the assets that make up the entity. The principal includes income earned on the principal that has not been distributed. The principal is also called the corpus.
"Proceeds" means the income earned on the principal. It is usually interest, dividends, or rent. When the proceeds are not distributed, they become part of the principal.
"Pooled trust" means a trust meeting all of the following conditions:
(1) It contains funds of more than one disabled individual, combined for investment and management purposes;
(2) It is for the sole benefit of disabled individuals (as determined by SSA criteria);
(3) It was created by the disabled individuals, their parents, grandparents, legal guardians, or by a court;
(4) It is managed by a nonprofit association with a separate account maintained for each beneficiary; and
(5) It contains a provision that upon the death of the individual, for any funds not retained by the trust, the state will receive all amounts remaining in the individual's separate account up to the total amount of Medicaid paid on behalf of that individual.
"Revocable" means the legal instrument can be changed or terminated by the grantor, or by petitioning the court. A legal instrument that is called irrevocable, but that can be terminated if some action is taken, is revocable for the purposes of this section.
"Sole-benefit trust" means an irrevocable trust established for the sole-benefit of a spouse, blind or disabled child, or disabled individual. In a sole-benefit trust no one but the individual named in the trust receives benefit from the trust in any way either at the time the trust is established or at any time during the life of the primary beneficiary. A sole-benefit trust may allow for reasonable costs to trustees for management of the trust and reasonable costs for investment of trust funds.
"Special needs trust" means an irrevocable trust meeting all of the following conditions:
(1) It is for the sole benefit of a disabled individual (as determined by SSA criteria) under sixty-five years old;
(2) It was created by the individual's parent, grandparent, legal guardian, or by a court; and
(3) It contains a provision that upon the death of the individual, the state will receive the amounts remaining in the trust up to the total amount of Medicaid paid on behalf of the individual.
"Testamentary trust" means a trust created by a will from the estate of a deceased person. The trust is paid out according to the will.
"Trust" means property (such as a home, cash, stocks, or other assets) is transferred to a trustee for the benefit of the grantor or another party. The department includes in this definition any other legal instrument similar to a trust. For annuities, refer to WAC 388-561-0200.
"Trustee" means an individual, bank, insurance company or any other entity that manages and administers the trust for the beneficiary.
"Undue hardship" means the client would be unable to meet shelter, food, clothing, and health care needs if the department applied the transfer of assets penalty.
WAC 182-516-0201 Annuities established on or after April 1, 2009
The department determines how annuities affect eligibility for medical programs. Applicants and recipients of medicaid must disclose to the state any interest the applicant or spouse has in an annuity.
A revocable annuity is considered an available resource.
The following annuities are not considered an available resource or a transfer of a resource as described in WAC 388-513-1363, if the annuity meets the requirements described in (4)(d), (e) and (f) of this subsection:
Purchased with proceeds from a simplified employee pension (within the meaning of section 408 of the Internal Revenue Code of 1986); or
Purchased with proceeds from a Roth IRA described in section 408A of the Internal Revenue Code of 1986.
The purchase of an annuity not described in subsection (3) established on or after April 1, 2009, will be considered as an available resource unless it:
Is immediate, irrevocable, nonassignable; and
Is paid out in equal monthly amounts with no deferral and no balloon payments:
Over a term that is not less than five years if the actuarial life expectancy of the annuitant is at least five years; or
Over a term not less than the actuarial life expectancy of the annuitant, if the actuarial life expectancy of the annuitant is less than five years.
Actuarial life expectancy shall be determined by tables that are published by the office of the chief actuary of the social security administration (http://www.ssa.gov/OACT/STATS/table4c6.html).
Is issued by an individual, insurer or other body licensed and approved to do business in the jurisdiction in which the annuity is established;
Names the state as the remainder beneficiary when the purchaser of the annuity is the annuitant and is an applicant for or recipient of medicaid, or a community spouse of an applicant for or recipient of long-term care or waiver services:
In the first position for the total amount of medical assistance paid for the individual, including both long-term care services and waiver services; or
In the second position for the total amount of medical assistance paid for the individual, including both long-term care services and waiver services, if there is a community spouse, or a minor or disabled child as defined in WAC 388-475-0050 (b) and (c) who is named as the beneficiary in the first position.
Names the state as the beneficiary upon the death of the community spouse for the total amount of medical assistance paid on behalf of the individual at any time of any payment from the annuity if a community spouse is the annuitant;
Names the state as the beneficiary in the first position for the total amount of medical assistance paid on behalf of the individual at the time of any payment from the annuity, including both long-term care services and waiver services, unless the annuitant has a community spouse or minor or disabled child, as defined in WAC 388-475-0050 (b) and (c). If the annuitant has a community spouse or minor or disabled child, such spouse or child may be named as beneficiary in the first position, and the state shall be named as beneficiary in the second position:
If the community spouse, minor or disabled child, or representative for a child named as beneficiary is in the first position as described in (f) and transfers his or her right to receive payments from the annuity for less than fair market value, then the state shall become the beneficiary in the first position.
If the annuity is not considered a resource, the stream of income produced by the annuity is considered available income.
An irrevocable annuity established on or after April 1, 2009 that meets all of the requirements of subsection (4) except that it is not immediate or scheduled to be paid out in equal monthly amounts will not be treated as a resource if:
The full pay out is within the actuarial life expectancy of the annuitant; and
The annuitant:
Changes the scheduled pay out into equal monthly payments within the actuarial life expectancy of the annuitant; or
Requests that the department calculate and budget the payments as equal monthly payments within the actuarial life expectancy of the annuitant beginning with the month of eligibility. The income from the annuity remains unearned income to the annuitant.
An irrevocable annuity, established on or after April 1, 2009 that is scheduled to pay out beyond the actuarial life expectancy of the annuitant, will be considered a resource.
An irrevocable annuity established on or after April 1, 2009 that meets all of the requirements of subsection (4) or (5) is considered unearned income when the annuitant is:
The client;
The spouse of the client;
The blind or disabled child, as defined in WAC 388-475-0050 (b) and (c), of the client; or
A person designated to use the annuity for the sole benefit of the client, client's spouse, or a blind or disabled child of the client.
An annuity is not considered an available resource when there is a joint owner, co-annuitant or an irrevocable beneficiary who will not agree to allow the annuity to be cashed, unless the joint owner or irrevocable beneficiary is the community spouse. In the case of a community spouse, the cash surrender value of the annuity is considered an available resource and counts toward themaximum community spouse resource allowance.Nothing in this section shall be construed as preventing the department from denying eligibility for medical assistance for an individual based on the income or resources derived from an annuity other than an annuity described in subsections (3), (4), and (5).
WAC 182-516-0201 Annuities established on or after April 1, 2009
The department determines how annuities affect eligibility for medical programs. Applicants and recipients of medicaid must disclose to the state any interest the applicant or spouse has in an annuity.
A revocable annuity is considered an available resource.
The following annuities are not considered an available resource or a transfer of a resource as described in WAC 388-513-1363, if the annuity meets the requirements described in (4)(d), (e) and (f) of this subsection:
Purchased with proceeds from a simplified employee pension (within the meaning of section 408 of the Internal Revenue Code of 1986); or
Purchased with proceeds from a Roth IRA described in section 408A of the Internal Revenue Code of 1986.
The purchase of an annuity not described in subsection (3) established on or after April 1, 2009, will be considered as an available resource unless it:
Is immediate, irrevocable, nonassignable; and
Is paid out in equal monthly amounts with no deferral and no balloon payments:
Over a term that is not less than five years if the actuarial life expectancy of the annuitant is at least five years; or
Over a term not less than the actuarial life expectancy of the annuitant, if the actuarial life expectancy of the annuitant is less than five years.
Actuarial life expectancy shall be determined by tables that are published by the office of the chief actuary of the social security administration (http://www.ssa.gov/OACT/STATS/table4c6.html).
Is issued by an individual, insurer or other body licensed and approved to do business in the jurisdiction in which the annuity is established;
Names the state as the remainder beneficiary when the purchaser of the annuity is the annuitant and is an applicant for or recipient of medicaid, or a community spouse of an applicant for or recipient of long-term care or waiver services:
In the first position for the total amount of medical assistance paid for the individual, including both long-term care services and waiver services; or
In the second position for the total amount of medical assistance paid for the individual, including both long-term care services and waiver services, if there is a community spouse, or a minor or disabled child as defined in WAC 388-475-0050 (b) and (c) who is named as the beneficiary in the first position.
Names the state as the beneficiary upon the death of the community spouse for the total amount of medical assistance paid on behalf of the individual at any time of any payment from the annuity if a community spouse is the annuitant;
Names the state as the beneficiary in the first position for the total amount of medical assistance paid on behalf of the individual at the time of any payment from the annuity, including both long-term care services and waiver services, unless the annuitant has a community spouse or minor or disabled child, as defined in WAC 388-475-0050 (b) and (c). If the annuitant has a community spouse or minor or disabled child, such spouse or child may be named as beneficiary in the first position, and the state shall be named as beneficiary in the second position:
If the community spouse, minor or disabled child, or representative for a child named as beneficiary is in the first position as described in (f) and transfers his or her right to receive payments from the annuity for less than fair market value, then the state shall become the beneficiary in the first position.
If the annuity is not considered a resource, the stream of income produced by the annuity is considered available income.
An irrevocable annuity established on or after April 1, 2009 that meets all of the requirements of subsection (4) except that it is not immediate or scheduled to be paid out in equal monthly amounts will not be treated as a resource if:
The full pay out is within the actuarial life expectancy of the annuitant; and
The annuitant:
Changes the scheduled pay out into equal monthly payments within the actuarial life expectancy of the annuitant; or
Requests that the department calculate and budget the payments as equal monthly payments within the actuarial life expectancy of the annuitant beginning with the month of eligibility. The income from the annuity remains unearned income to the annuitant.
An irrevocable annuity, established on or after April 1, 2009 that is scheduled to pay out beyond the actuarial life expectancy of the annuitant, will be considered a resource.
An irrevocable annuity established on or after April 1, 2009 that meets all of the requirements of subsection (4) or (5) is considered unearned income when the annuitant is:
The client;
The spouse of the client;
The blind or disabled child, as defined in WAC 388-475-0050 (b) and (c), of the client; or
A person designated to use the annuity for the sole benefit of the client, client's spouse, or a blind or disabled child of the client.
An annuity is not considered an available resource when there is a joint owner, co-annuitant or an irrevocable beneficiary who will not agree to allow the annuity to be cashed, unless the joint owner or irrevocable beneficiary is the community spouse. In the case of a community spouse, the cash surrender value of the annuity is considered an available resource and counts toward themaximum community spouse resource allowance.Nothing in this section shall be construed as preventing the department from denying eligibility for medical assistance for an individual based on the income or resources derived from an annuity other than an annuity described in subsections (3), (4), and (5).
Notify Ken Washington of OFR-Estate Recovery via a DMS tickler when an annuity is imaged in the electronic case record (ECR).
Document type for tickler: TD (use for either an annuity or a trust)
Subject: Annuity (if an annuity) or Trust (if a trust)
Site: 101
User: WAKE
Ready date: Default date is fine
Make sure the annuity is indicated on the appropriate ACES RES 1 screen. Add in the remarks behind RES 1 that OFR has been notified an annuity is in the ECR
NOTE:
Civil Service Annuities are considered pension benefits. These pension benefits are unearned income. We do not count the value of Civil Service Annuities.
The Information following applies to both annuity WACs
Annuities and Free Look Period
According to the Washington State Office of Insurance Commissioner (OIC) an agent or an annuitant can't waive the free look period of a contract simply by having the annuitant sign a statement.
RCW 48.18.190 would require that a modification be made part of the contract by the insurer.
Even if the insurer made a waiver part of the contract (which is unlikely), the OIC indicates they would rely on RCW 48.18.510 to enforce the free look provision.
RCW 48.23.170 Insurance code provisions requires annuity contracts to contain an integration and entire contract provision to the effect that the contract constitutes the entire contract between the parties. RCW 48.18.100 requires that such contract forms be filed with and approved by the commissioner. Knowingly using a contract form which has not been approved is prohibited. (RCW 48.18.100 (5)).
The OIC honors any free look period indicated on the contract as long as it is no less than 10 days.
The free look period starts on the date the contract is delivered to the annuitant. Most insurers require a receipt of delivery which would indicate the date of delivery to the annuitant.
Until the free look period is up, the funds put into an annuity is considered an available resource.
A copy of the final annuity contract delivered to the annuitant and verification of the delivery receipt also called the "delivery advice" is required in order to determine the date the free look period ends.
EXAMPLE
An application for a Single Premium Immediate Annuity (SPIA) is received for $80,000. The date of issue on the SPIA is indicated as February 28,2011. The date of first payment is indicated as June 01,2011.
The application has an attachment indicating the applicant irrevocably waives the ten day free look period.
For this example, more information is needed to determine eligibility. A copy of the actual contract and verification of the date the contract was delivered to the annuitant must be requested.
Once received, the actual contract has no waiver of the ten day free look period. The receipt indicates the contract was delivered to the annuitant on April 22, 2011. The cover sheet of the contract indicates the free look period is 10 days. The 10 days runs into May 2011, therefore in this example we are looking at resource eligibility effective June 1, 2011.
If the annuity doesn't pay out in equal payments
Not an available resource if:
Meets all other exemption criteria
And the annuitant:
Changes the scheduled pay out to equal monthly payments or
Requests DSHS to calculate and budget payments as equal monthly payments beginning the first month of eligibility
Revocable Annuities
Available resource
Value is the amount the person would receive back if cashed in
Value may be reduced due to early cash out penalties
No asset transfer penalty if it is revocable and can be cashed in even if cash out is reduced due to early cash out penalties
Annuity payouts are not income-they are a conversion of one form of resource for another
Revocable annuities are available resources. Count the value that the annuitant would receive if cashed in. This may be less than the face value because of early cash out penalties.
Do not impose a transfer penalty on the portion that the person would lose if the annuity is cashed in.
Because the annuity is an available resource, if the value does not put the person over the resource limit and it is retained, any payouts are a conversion of one resource (the annuity) for another resource (cash). We don’t count it as both a resource and income in the same month.
Not an available resource if the joint owner, co annuitant, or irrevocable beneficiary refuses to allow the annuity to be cashed
Unless
The joint owner, co-annuitant, or irrevocable beneficiary is the community spouse
Then, the cash surrender value is considered an available resource
Available irrevocable annuities- Saleable
Available resource if the annuity, right to payments, or the beneficiary designation can be sold on the open market
Value is the amount the person would receive if sold on the open market
Generally, this will be less than the original investment
If sold for less than the original investment-No transfer penalty if they receive fair market value (FMV)
If retained, payouts are not income- they are a conversion of one type of resource for another
An irrevocable annuity is saleable?
There are a number of companies that purchase the stream of income the annuity produces. In order to determine a fair market value for an annuity that does not meet the criteria needed in the WAC, 2 quotes by a company that purchases annuity stream of income should be received to determine the fair market value of the annuity.
Available Irrevocable Annuities-Unsaleable
Transfer of asset if:
The annuity is not saleable or
The annuity precludes transfer of rights to payment or beneficiary designation
The annuity is sold for less than fair market value (FMV)
Washington State tax ID and address when naming the department as beneficiary
Field staff have received inquiries as to the Washington State tax ID and address from companies specializing in annuities.
Washington State Tax I.D.: 91 6001088
Address: Washington State DSHS-OFR
Attn: Estate Recovery
PO Box 9501
Olympia WA 98501
WORKER RESPONSIBILITIES
Look at the face page of the annuity to determine:
The type of annuity;
The owner, the annuitant, and the beneficiary, if any;
When and how monies will be paid into the annuity (premiums);
When and how monies will be paid out of the annuity; and
Whether the annuity is revocable or irrevocable
The date the annuity was established. For annuities established prior to 4/1/2009 use WAC 388-561-0200. For annuities established on or after 4/1/2009 use WAC 388-561-0201.
The date the annuity contract was delivered to the annuitant. A copy of the annuity contract and receipt of delivery are needed to determine when the free look period ends. The funds are considered an available resource until the free look period is over. (see above information regarding the free look period).
To determine the countable resource value of a revocable annuity :
Verify the current value of the annuity with the company/group that issued the annuity or a company that purchases annuities;
Deduct early withdrawal penalties and taxes due; and
Add accrued interest.
When a client can withdraw any part of the annuity, or a previously unavailable annuity becomes available, count it as income in the month it becomes available.
Use the social security actuarial life expectancy tables to determine whether annuity payments will exceed the actuarial life expectancy of the annuitant. If the payment schedule does exceed the life expectancy, count the uncompensated value of the annuity that exceeds the client’s life expectancy as a transfer of resources and establish a period of ineligibility as described in WAC 388-513-1363 through WAC 388-513-1366 for long-term care assistance.
Consider income received from an annuity as unearned income.
When the client is the annuitant and you are counting the annuity toward the resource limit, use either Type Code “AI” Annuity Irrevocable or “AR” Annuity Revocable. ACES will count the value toward the resource limit when either code is used.
If the client is the annuitant and you want to count the annuity – use either code
UNER
If the client is the annuitant and receiving monthly payments as income, code the annuity payment as "OC" Countable Income on the UNER screen
LTCD- Counting the payments as spouse's resource
If the community spouse is the annuitant and you do not want the annuity to count toward the resource limit, code it as "AN" Annuity on the LTCD screen
If the community spouse is the annuitant and you do want to count it as a resource, code it as "OC" Other Countable Resource on the LTCD screen.
LTCD-Counting the payments as spouse's income
If the community spouse is the annuitant and is receiving payments as income, code the annuity payments as "OC" Other Countable Income on the LTCD screen
