Federal Court Allows Annuity Strategy to Protect Assets

The United States District Court for the District of New Jersey has issued an important decision concerning the use of annuities for Medicaid planning.  The Honorable William J. Martini rendered this favorable decision in the case of Jane Cushing v. Jennifer Langer Jacobs, et al; Docket 20-cv-130.

The legal issue presented in the Cushing decision concerned the legality of an immediate annuity with an insurance company which was designed to protect that person’s life savings and assets.  Judge Martini noted in his decision that annuities purchased by Medicaid applicants are not countable assets if they satisfy the federal statute.  The applicable federal statute requires that the annuity be irrevocable, immediate, may not be transferred and it must have no cash or loan value.  In the Cushing case the Court determined that the annuity that was established with the Croatian Fraternal Union of America did satisfy this federal statute.

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The applicable federal statute requires that the annuity be irrevocable, immediate, may not be transferred and it must have no cash or loan value. 

Annuities can be used to shelter assets from Medicaid and the cost of long-term care.  The terms of the annuity, however, must satisfy the stringent requirements of the federal statute.