Protecting Annuities

An annuity cannot be protected if the client is required to designate DHS as the preferred remainder beneficiary (PRB).

A client may choose to protect an annuity if the client does not have to designate DHS as the preferred remainder beneficiary.

Example:

Herbert’s Partnership policy has paid $12,000 in benefits. He owns an annuity in the accumulation phase with a cash value of $10,000, which he would like to protect. He is not required to name DHS as the PRB.

Action:

Allow Herbert to protect the annuity. By protecting the annuity’s cash value it is not counted in his asset total and cannot be claimed against in estate recovery.

However, if a client must later designate DHS as the PRB, the death benefit is then available for estate recovery, even if the annuity was protected earlier. The value of the annuity is then subtracted from the protected assets total, and the client may designate other assets in its place.

Example Continued:

Herbert protected his annuity. At his annual renewal Herbert reported that he annuitized his annuity that month. Herbert’s annuity now meets the annuity requirement to designate DHS as the PRB.

Action:

Require Herbert to designate DHS as the PRB in order to continue his eligibility for MA-LTC. Once DHS is designated as the PRB, the annuity can be accessed during estate recovery and is no longer protected. Herbert is allowed to protect other assets in place of the value of annuity that was protected.

It is important to inform clients who choose to protect an annuity that if in the future the annuity meets the DHS PRB annuity requirements the annuity will not be protected during estate recovery.

More information about designating DHS as the PRB can be found in the EPM and in the Annuities and MA-LTC course.