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Wisconsin Win! Annuity Was Not Available and Not Countable

Krause Financial Services recently consulted on a Wisconsin Fair Hearing case in which the State Agency concluded that an annuity was countable and denied the application due to excess resources. The annuity contained the following non-assignment endorsement:


This Contract may not be transferred, assigned, sold, mortgaged, encumbered, surrendered or commuted. This Contract has no cash surrender value and is totally and permanently irrevocable after the Right to Examine and Cancel Period has expired. The Contract may not be pledged as collateral for a loan or as a security for the performance of any obligation.


Despite this language, the State Agency obtained a valuation from a company on the open market. The company offered to purchase the remaining payments of the annuity for a set value.


Evidence was presented to the Administrative Law Judge in multiple forms. Specifically, the ALJ was presented with a copy of the annuity contract containing the non-assignment endorsement, a copy of the offer to purchase the annuity, and a letter from the insurance company issuing the annuity stating that the annuity had no liquidity value. A fair hearing was then conducted wherein testimony was taken from witnesses, including a representative of the company that had assigned a value to the annuity, and Thomas Krause, J.D. who rebutted that valuation.


In issuing the initial decision, the ALJ explained that the company offering to purchase the annuity had not valued the annuity itself but rather the income stream. The ALJ relied on the testimony of other witnesses who offered the opinion that the annuity had a zero-dollar value because of the non-assignability language. In the decision the ALJ further relied upon the Third Circuit case James v. Richman, 547 F.2d 214 (3rd Cir. 2009), which addressed similar facts. As stated in Richman, “Even if the Department is correct that [Petitioner] has the de facto ability to effect a change in ownership of the annuity, she cannot do so without breaching the contract and incurring legal liability.” Richman. at 219.


The ALJ concluded that the company offering to purchase the annuity was incorrect in its belief that it could purchase the annuity. Because the annuity could not be purchased, it could not be counted as resource under the applicable rules. The ALJ’s decision has been forwarded to the agency as “Proposed” and a final determination is pending.