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Is a Deferred Annuity Helpful from a Medicaid or MassHealth Standpoint?

January 14, 2013

A deferred annuity is almost never helpful from a Medicaid or MassHealth standpoint (despite whatever someone selling an annuity says).

For older married couples, the correct first move if one of them enters a nursing home is to move all assets into the name of the healthy one. (See Protecting Assets and Maximum Income for the Community Spouse When Applying for MassHealth in 2013 to Help Pay for the Unhealthy Spouse’s Nursing Home Bills in Massachusetts.)  That means the ownership of any annuity in the name of the institutionalized spouse has to be changed to the name of the at-home spouse; unfortunately, if that move is not allowed, the annuity has to be surrendered, and the surrender charges have to be paid. In particular, an annuity owned by the IRA of the institutionalized spouse always has to be surrendered, as there is no other way to transfer that asset directly to the name of the at-home spouse.

There is another type of annuity that can sometimes help preserve assets upon a nursing home stay and a MassHealth application, but that annuity (known as an immediate annuity) is a lousy investment and does not have to be purchased — and usually should not be purchased — until around the time of a MassHealth application.

Where a deferred annuity is never the right type of annuity for MassHealth purposes, why should anybody ever be buying it or selling it in the first place if the elderly person has future MassHealth concerns?  (See Is It a Good Idea for an Elderly Person to Purchase a Deferred Annuity? )

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