Method 2 - Step 2

The next step, if the annuity is a commercial annuity, is to determine if the annuity issues monthly periodic payments in equal amounts

Equal payments mean that each payment throughout the life of the payment period is for the same amount. If the payments end in a balloon payment (a large payment not equal to regular payments) the annuity does not have payments in equal amounts.Variable annuities do not provide equal payments.

that are not deferred.

A deferred payment means that the payments do not start within one payment interval from the date of annuitization. For example, if the payment interval is once a month and the payments do not begin until three months after annuitization, the payments have been deferred.

This appears to be the same as Method 1 Step 2, but there is a slight difference. For Method 2 the payments must be equal monthly payments.

If the annuity has equal monthly payments, including not having a balloon payment, and does not defer payments, continue to Step 3.

If the annuity does not have equal monthly payments, or payments are deferred, an annuity transfer has occurred and an uncompensated transfer amount must be calculated.

The uncompensated transfer amount

The uncompensated amount is then used to determine a transfer penalty. Do not proceed to Step 3.

is the amount of the funds the client and/or the client’s spouse annuitized minus any annuity payments already received.

No further evaluation is required after a transfer has been identified in this step.

Example:

Barney is requesting MA-LTC today. He purchased and annuitized an annuity last year through his insurance company. He purchased the annuity for $80,000 from his savings account. Barney’s wife is the payee and is currently receiving payments of $500 each month. Payments began one month after annuitization. Her last payment will be in the amount of $20,000. To date his wife has received payments for 10 months.

Action:

Determine the uncompensated value of the transfer to be $75,000 because Barney’s annuity has a balloon payment which means the monthly payments are not equal. [$80,000 funds annuitized - $5,000 annuity payments already received ($500 X 10 months)].

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Transfer Evaluation - Evaluation Method 2

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