Throughout the inquiries that were made this week in the Ask Dale section, I received an interesting question from an elder law attorney in Texas regarding the use of annuities in VA planning. The Texas attorney asked whether an annuity utilized in VA planning should follow the same guidelines as an annuity utilized in Medicaid planning (i.e. irrevocable, non-assignable, zero cash value, etc.).
The VA Program does not require that an immediate annuity contract be compliant with the Deficit Reduction Act of 2005 ("DRA") in order to be treated as an income stream versus a countable resource.
The advantage of using a non-DRA compliant single premium immediate annuity in a VA plan is that if the owner/annuitant/payee of the single premium immediate annuity were to convert from VA planning to Medicaid planning as a result of moving from assisted living to a nursing home, he or she could get the single premium immediate annuity contract valued on the secondary market (e.g. J.G. Wentworth), and subsequently sell it to a family member at the secondary market value - allowing for a 30%-50% discounted valued, which creates a substantial wealth transfer.
