My husband’s father had annuities one for each of his children. At the time he opened them, they were in his name and each child’s name was on his/her annuity as well. When my father in law passed away in 1998 the bank automatically took his name off and added my mother in law name and again each child’s name was attached to their annuity.
my MIL is considering going to care facility. She is 90. She wants to cash the annuities and give her children their inheritance from their father as he wished. Will this count as income for her should she need to apply for Medicaid down the road. We are in Ohio
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& the bank officer who did that, should be slapped & hard. Bet 8% commission for almost zero work. Do the quick math, really you will want to slap something…. so prepare yourself.
Tax reporting on these for the past basically 25 years has all been tied to MiL SS# too hasn’t it? None of these were minors were they? So no need for MiL to be an erstwhile overseer for them. I bet, this was totally self serving bank officer action as he wanted that commission. Sigh!
Realize anything MiL does with these are income & have tax reporting as well as they will surface for Medicaid. She’s 90 so time is not in her favor for the 5 yr lookback. Here’s my armchair not a FA suggestion, I’d look at the annuities to see just what they do for:
1. penalties for early cash out. It’s probably pretty hefty. So you really do not want want to do that. But you want an idea of the cost if this was done.
However
2. all annuities allow for a set % amount every year to be taken out without any penalty. These sound like old annuities, maybe 1980’s? so hopefully have big annual % allowed. The older ones sometime allow for 10% -15% to be taken without any penalty at all.
Find out exactly what it could be, BUT DO NOT DO IT. The annuity company will NOT be happy yiu are even asking and expect some push back or even some suggestions to “moving the $ into other things that are ok for Medicaid”. It’s not exactly true. Turn a deaf ear.
3. Take this info & all other financial to a CELA atty firm to come up with a plan for mom. They will know what your state Medicaid approach is towards annuities. She’s 90, you do not have time to dawdle.
By your States approach, what I mean is that for some states, they will want the applicant to cash out in full. Even if it means a huge penalty. But for other states, they are totally ok with elder keeping their annuity BUT will require that the State become the new primary beneficiary ahead of the current ones. It’s an easy document to do. After the elders death should there be $ left after all repayment’s made to the State from the annuity, then the heirs get the remainder. Truly “remainderman”. A good elder law firm will know exactly how Medicaid in your state looks at annuities. Some States do this for bigger Term life insurance policies as well.
imo Annuities have too many filings for taxes to ever DIY much less deal with Medicaid later on. If y’all end annuity early, it will need a $ % determination done based on actuarial tables of mom age for payout. It’s an income document that gets attached to IRS filings, & needs CPA or tax atty do these. It’s not dad wanted the $ 120K annuity to 1/3 to go to all 3 kids and here’s a check unfortunately.
Annuity that’s cashed and gifted can surface as transfer penalty for Medicaid based at date of Medicaid application. If mom gave each 40K and its 4 years later and $120K transfer penalty placed on mom’s application. Sissy does not have 40K. So either 2 kids pay Sissys 40large or in addition their own 40K ea or figure out whose home mom is going to move into. NH bill will still exist as Medicaid has found mom ineligible since Day 1. $ like this flat surfaces as it’s all reported. Really annuities are the worst imo as so often sold with fear factor.
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It all depends upon how these annuities are titled, and really only the bank or insurance agency who issued them can explain that to you and to MIL.
I hope that Igloo is around looking into queries today as she is very good as this sort of question. But for now I need to tell you that you should likely discuss this with medicaid and with the company that issued and holds the annuities. Get information from the experts in cases like this, because depending on the opinions of folks on a forum can lead you the wrong direction, and in cases where medicaid is concerned you cannot afford to make mistakes. Sure wish you the best.