NON-QUALIFIED ANNUITIES

Properly Naming the State of Indiana as a Beneficiary

The State needs to be named as a beneficiary by the time of the Medicaid application in some situations.  You must name the State as primary beneficiary (unless a minor or disabled child exists) before the Medicaid application if we are taking any of the following steps with the non-qualified annuity:

  • Additions of principal;
  • Elective withdrawals;
  • Requests to change the distribution of the annuity;
  • Elections to annuitize the contract;
  • A change in ownership; or
  • Any other non-routine action.

The State must be listed second if there is a minor or disabled child.  The State can only recover when the Community Spouse dies before the Institutionalized Spouse and there are no minor or disabled children.

The beneficiary designation will only be for benefits provided to the applicant for Medicaid.  This does not include the Community Spouse.

Example:

Roy is in the nursing home and Jane is at home.  The beneficiary designation will read “The State of Indiana for the amount of medical assistance provided to Roy Smith.”

Your non-qualified annuity can be a financial ticking time bomb if you or your spouse needs Medicaid assistance for nursing home care or waiver services.  You need to consult an elder law attorney before you file a Medicaid application in Indiana if you or your spouse own a non-qualified annuity.

Example:

Roy has a non-qualified annuity worth $50,000.  Roy is in the nursing home.  Jane takes $5,000 out of the annuity to pay for his care in May.  She then files a Medicaid application in June for Roy.  She does not name the State of Indiana as the beneficiary of the annuity for any Medicaid assistance provided to Roy.  Imagine her surprise when the State imposes a transfer penalty of eight months because she didn’t properly name the State of Indiana as a beneficiary.

                                                                                    Respectfully yours,
Keith P. Huffman
June 2016

Categories: Article, Elder Law, and Medicaid Planning.