Name on the Check Rule Annuity Win: Jackson v. Selig

Krause Financial

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In May of 2008 Mr. Jackson entered an Arkansas nursing home while his wife, Mrs. Jackson, continued to reside in the community.  In February of 2009 Mr. Jackson purchased two single premium immediate annuities.  One of the annuities was an IRA annuity, and provided monthly payments to Mrs. Jackson under the “name on the check” rule.  Both annuity purchases complied with the Deficit Reduction Act of 2005 (“DRA”).

The subsequent application for Medicaid resulted in a determination that Mr. Jackson’s annuity purchases constituted a transfer of resources.  The Arkansas Department of Human Services (“ADHS”) informed Mr. Jackson that his application was denied because: (1) the period of ineligibility imposed for transferring assets for less than fair market value; or alternatively, (2) the period of ineligibility imposed for the diversion of annuity income.

Mr. Jackson requested a hearing, which was held before an administrative law judge (“ALJ”).  The ALJ stated that ADHS had erred in penalizing Mr. Jackson, but that he was still ineligible because his resources exceeded the applicable program limit – the annuities were considered countable resources.  Mr. Jackson filed an appeal.

Specifically, the ALJ held that the issue of whether Mr. Jackson transferred assets for less than fair market value was moot because an applicant must first be eligible to receive benefits before he or she can even be penalized.  The ALJ alleged that Mr. Jackson was never eligible for benefits due to his ownership of the two annuities.  The ALJ further purported that Mr. Jackson was the owner of the monthly income derived from the annuities, which put him over the applicable monthly income limit for eligibility.

It was found that the annuity purchases complied with DRA, therefore could not be considered as assets.  Furthermore, it was found that because the annuity payments were payable to the community spouse, and only income of the institutionalized spouse is considered in determining eligibility, the annuity income cannot be considered by ADHS as income or resources available to Mr. Jackson.

In closing, based on the findings of fact and conclusions of law, ADHS was permanently enjoined from assessing a penalty against Mr. Jackson for the purchase of the annuities, and from considering the annuities or their payments as income or resources available to Mr. Jackson in determining his eligibility for Medicaid benefits.


Jackson v. Selig (U.S. Dist. Ct., E.D. Ark., No. 3:10-CV-00276-BRW, March 13, 2013)


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