Second Circuit Affirms That Income Stream from Annuity Is Not an Asset for Medicaid Purposes
In an important case impacting the use of Annuities as a part of an Elder Law Plan, the the U.S. Court of Appeals for the Second Circuit upholds a district court ruling that Connecticut cannot treat the income stream from an annuity as an available asset for the purposes of Medicaid eligibility. Lopes v. Dept. of Social Services (2nd Cir., No. 10-3741-cv, Oct. 2, 2012).
After John Lopes moved to a nursing home, his wife, Amelia, purchased an annuity. She received a letter from the annuity company stating that no part of the annuity was assignable, including periodic payments. Mr. Lopes applied for Medicaid. The state identified a potential buyer of the annuity’s income stream and directed Mrs. Lopes to attempt to sell the annuity. When Mrs. Lopes refused, the state denied Medicaid benefits to Mr. Lopes.
Mr. Lopes appealed, arguing Mrs. Lopes was not legally obligated to sell the annuity’s income stream. The state ruled that Mrs. Lopes’ annuity was an available asset, and Mr. Lopes appealed to the court.
The U.S. District Court for the District of Connecticut granted Mr. Lopes’s motion for summary judgment, ruling that the state could not treat the income stream from an annuity as an available asset for the purposes of Medicaid eligibility. Connecticut appealed.
The U.S. Court of Appeals for the Second Circuit affirms the district court, holding that the payment stream from a non-assignable annuity is not a resource for purposes of determining Medicaid eligibility. The court goes on to rule that it is irrelevant that the annuity was purchased just prior to Mr. Lopes’ application for Medicaid benefits. The court notes that its decision was influenced by the views, which it solicited, of the U.S. Department of Health and Human Services (HHS). In an amicus brief, HHS urged the Second Circuit to accept Mrs. Lopes’ position, which it said was consistent with Medicaid’s primary purposes of providing health care to the indigent and protecting community spouses from impoverishment. You can read the full court text here.
Based on this outcome, it is safe to say that the immediate annuity remains a viable Medicaid/Elder Law planning option for the community spouse when considering options for increasing his or income following his or her spouse’s entry into a nursing home.
For a closer review of how Annuities can be used as a part of your Elder Law Plan to protect assets read this earlier article by Douglas L. Kaune. Please also give us a call at 610 933 8069 to schedule a meeting to review your case and various planning options available to help protect assets from the ever increasing cost of long term care. Unruh, Turner, Burke & Frees, P.C. is a full service firm with offices in Malvern, Phoenixville and West Chester, Pennsylvania.
