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Does buying a deferred annuity protect assets?

April 12, 2017


From 1990 through 1998 I worked for a financial services consulting firm.  My role was to train and assist bank personnel with making available to their customers alternative financial products such as annuities, mutual funds, long-term care insurance, and life insurance.  In my last few years with the consulting firm I was Vice President in charge of insurance services for the senior market.


Working in the field for those eight years I sat down with many annuity owners.  The financial services industry is highly regulated for good reason, unfortunately there are sales people who either don’t know what they are selling or are purposely giving people incorrect information to make the sale.  Some people purchased the annuity because they were told it would protect their savings from the high cost of long-term care.  It would allow them to get state and federal assistance via Medicaid which would pay for the majority of their care. This is inaccurate.  The annuity must be in the payout mode.  A deferred annuity is considered an asset subject to spend-down for purposes of Medicaid.  It also has to be written by a company that will provide the customer with a Non-Assignment Endorsement at the time of converting the deferred annuity to an income annuity.


In order to meet the rules of Medicaid the annuity has to be turned into an income stream and has to meet the following criteria:

  • Irrevocable

  • Non- Assignable ( can’t have the income sent to someone other than the original owner)

  • No Cash Value

  • Level Payments

  • Non- Transferrable (can’t transfer income and ownership to someone else)

  • It must be Actuarially Sound (payments can’t be past the annuitant’s life expectancy)

Only a handful of insurance companies will write Medicaid Compliant Annuities (MCA).  Most will not.  If you are qualifying for Medicaid make sure your annuity is with the right company.  Besides being willing to write a MCA the company should be financially strong at least an AM Best rating of A or better.

Don’t be mis-lead that purchasing a deferred annuity, be it a fixed, index, or variable annuity, will protect your savings.


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747 SW Mill View Way
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Tel: 503-680-0251​


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