Find Answers to All of Your Annuity Questions


How do I order a copy of the book?
Go to the home page and click on the Order button.  All of the information on ordering the book is on that page.

Who is the book publisher?
LawFirst Publishing, a division of the Connecticut Bar Association, published the book.  See the Appearances/Media button on the home page for more information.

How did you manage to write a book while practicing law?
It wasn’t easy.  But I have a tolerant wife and family.  The amount of insight I received from actively representing clients and attending seminars and professional meetings actually made it easier to provide the latest information on annuities and their consequences.

Do you sell annuities?
No. The book is not sponsored by any life insurance company or other financial institution that sells annuities.  This book represents a review of annuities and their consequences from a completely independent source.

I own an annuity.  My financial advisor sold me the annuity as part of my investment portfolio. It is not in a retirement plan.  I do not receive any payments from the annuity at this time.  Is it considered an asset for Medicaid purposes?
Yes.  What you are describing is a non-qualified deferred annuity.  Deferred annuities can be sold and the funds applied to care so they are considered assets for Medicaid purposes.

My husband owned a deferred annuity and he held it outside his IRA.  He died last year.  I am 55 years old.  I need the amount invested in the annuity to meet my living expenses.  What income taxes will I have to pay if I cash in the annuity?
You will have to pay income taxes on the earnings from the annuity.  Some of the annuity will be a return of principal and some will be earnings subject to income tax.  If the amount that your husband paid for the annuity is less than the amount you receive from cashing in the annuity, no income tax will be due.  If the annuity has earnings, your current income tax rate will apply, not the rate that your husband and you were taxed before he died.  Even though you have not reached the age of 59½, you will not have to take substantially equal periodic payments to avoid the 10% penalty on early withdrawals.  Death of the holder of an annuity is one of the exceptions to the penalty.

A couple holds countable assets in excess of the maximum Community Spouse Protected Amount (CSPA) by virtue of a 401(k) that allows lump-sum withdrawal upon termination of employment.    The annuity is owned by the community spouse but she has not reached age 65.  The community spouse was recently laid off and is caring for her disabled spouse.  Can someone under age 70 ½ annuitize the 401(k) (income taxes aside) and convert the asset into income for Medicaid purposes?
Yes.  There is no age requirement for annuitizing a 401(k).  The annuitization of a 401(k) is not a transfer of assets under the Medicaid rules as long as the 401(k) participant is the community spouse.  Because an annuity in a qualified retirement plan cannot be sold, immediate annuities or annuitized deferred annuities are not available assets if held inside an IRA or qualified retirement plan.  See,Conn. DRA Regs Memo at 24 (in Resources section of this website).

The decedent under a pourover will devised all assets to an unfunded revocable trust.  The revocable trust called for $150,000 to be put into a separate subtrust that would pay a fixed sum each year to the beneficiary of that subtrust.  At the beneficiary’s death, the proceeds go to the beneficiary’s sister.  Can the Trustee set up an annuity with $150,000 from the probate estate and with terms similar to the provisions of the subtrust?
Creating an annuity with an insurance company could save a lot of trustee fees and trustee work over time.  The Trustee can usually create such an annuity under its investment powers in the revocable trust.  The danger in this situation is the remainder beneficiary.  An annuity that is payable over the beneficiary’s life would mean that that beneficiary’s sister will have no chance to receive her possible inheritance.  The Trustee should appeal to the remainder beneficiary’s practical sense and love for her sister.  The remainder beneficiary is unlikely to receive anything from the trust because the primary beneficiary will likely consume the principal of the trust during her lifetime.  Agreeing to convert the trust to an annuity will optimize the amount going to the beneficiary.  If the Trustee purchases an annuity in lieu of creating the trust, the Trustee should obtain a release and indemnification from the beneficiary’s sister.

Husband has Alzheimer’s disease.  The couple sold their home and have $200,000.00 left after they purchased a small condominium.  The community spouse is worried about having to spend down the money to qualify for Title 19 and not having any savings if she needs it.  They have 3 adult children and 6 grandchildren. Could the community spouse purchase an immediate annuity with some of the proceeds?
In Lopes v. Dept. of Social Services, the US Court of Appeals for the Second Circuit upheld the purchase of a non-assignable, non-qualified annuity by a community spouse as a way to increase the income of a community spouse.  See the Resources section of this website for a copy of that court decision.  A practical concern is that the state has to be named as a remainder beneficiary after the spouse. Thus, the couples’ children will not inherit any of the amount invested in the immediate annuity. This prospect may limit the amount the community spouse wants to invest in the annuity.  At the time of purchasing the annuity, work with the annuity company to include language that not only makes the annuity itself non-assignable, but also makes the income stream non-assignable and not payable to anyone other than the annuitant or beneficiary.  The Lopes v. Dept. of Social Services case provides a sample of this language that was approved by the Connecticut Insurance Department.