Disclaimer: With Medicaid, VA, and insurance regulations frequently changing, past blog posts may not be presently accurate or relevant. Please contact our office for information on current planning strategies, tips, and how-to's.
When you have a senior client seeking Medicaid benefits, existing annuities can pose a problem. Certain annuities may be deemed a countable asset, while others may count as a divestment. In some cases, your client’s annuity may be sold on the secondary market, and they can use the resulting funds to purchase a Medicaid Compliant Annuity and pursue Medicaid eligibility. Fortunately, we offer complimentary annuity valuation services and can get your client competitive offers on their contract. Here’s what you and your client can expect from the secondary annuity market.
Step 1: You send us your client’s contract.
Once you send in your client’s contract, we review it and determine if it can be sold on the secondary market. The most common types of annuities we evaluate are contracts that were purchased by seniors to provide income during their retirement years. In order to be sold on the secondary annuity market, the contract must meet the following requirements:
- Funded with non-qualified, after-tax dollars
- Annuitized and making regular payments
- No cash or surrender value option available
- Not an IRA
- Making payments for a certain, guaranteed period OR include a guaranteed cash benefit payout option upon the owner’s death
Read more: What is a Medicaid Compliant Annuity?
Step 2: We assess the contract’s value and present multiple offers.
After verifying the annuity meets these specific requirements, we assess its value. To do so, we send the contract details to secondary market companies that regularly purchase annuities in exchange for offer letters. We typically compile at least three offers to establish the annuity’s Fair Market Value and ensure the transaction is not penalized for Medicaid purposes. Our sister company, Krause Annuity Services, may also bid on the contract if it meets certain criteria. Once all offers are compiled, we send them to you to present to your client.
Step 3: Your client accepts an offer and completes the paperwork.
Your client chooses an offer to accept, and our office assembles the necessary paperwork to complete the sale. In most cases, the secondary market company takes over the ownership, payee, and primary beneficiary designations on the contract. After all the documents are completed and signed, our office sends them to the insurance company and follows up until all applicable ownership and designation changes have been completed. Then, the secondary market company releases the funds to your client, either by wiring the funds or mailing a check. As the new owner, payee, and beneficiary, the secondary company takes over the contract and receives all remaining payments as well as any death benefit of the annuity.
Step 4: Your client receives the cash.
The timing of this process can vary depending on the processing times of the insurance company and whether any additional information is required. However, when you work with us, the typical timeframe for the entire process, from start to finish, is 5 to 14 business days. On a case-by-case basis, our office may be able to release the payment prior to completion in order to meet specific deadlines for Medicaid eligibility.
If your client has a non-compliant annuity and is looking to qualify for Medicaid, contact our team at Krause Financial to find out if the contract can be sold on the secondary market.
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