Friday, September 10, 2010

Income Stream from Annuity Is Not Asset for Medicaid Eligibility Purposes

While many fear the use of Medicaid compliant annuities are under attack, a U.S. district court holds that Connecticut cannot treat the income stream from an annuity as an available asset for the purposes of Medicaid eligibility. Lopes v. Starkowski (U.S. Dist. Ct., Dist. Conn., No. 3:10-CV-307, August 11, 2010).

After John Lopes moved to a nursing home, his wife, Amelia, purchased an annuity. She received a letter from the annuity company saying that no part of the annuity was assignable, including periodic payments. Mr. Lopes applied for Medicaid. The state identified a potential buyer of the annuity's income stream and directed Mrs. Lopes to attempt to sell the annuity. Mrs. Lopes refused, and the state denied Medicaid benefits to Mr. Lopes.

Mr. Lopes appealed, arguing Mrs. Lopes was not legally obligated to sell the annuity's income stream. The state ruled that Mrs. Lopes' annuity was an available asset, and Mr. Lopes appealed to the court.

The U.S. District Court for the District of Connecticut grants Mr. Lopes's motion for summary judgment. The court holds that the annuity company did not permit Mrs. Lopes to assign the income stream from her annuity, so it could not be characterized as an asset. The court further finds that even if the income stream were assignable, "it would be incongruent with the principles of [Medicaid law] to permit a state to characterize even an assignable income stream as an asset." The court also notes that the Deficit Reduction Act does not require that states treat annuities as assets.

The key to this case was the "Medicaid compliant" nature of the annuity.  It must meet the strict requirements as set out in the Medicaid Manual.  Before you buy an annuity, please check with a Certified Elder Law Attorney (CELA).