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State of Wisconsin |
Release 26-02 |
An annuity is a purchase contract where the purchaser (person funding the annuity) pays a lump sum or makes periodic payments to a bank or insurance company (annuity issuer) in return for an expectation of future payments.
The annuitant is the person entitled to the payments. An annuity may include a beneficiary clause under which, if the annuitant dies, the contracting entity converts any funds remaining in the annuity into a lump sum or periodic payments which are paid to a designated remainder beneficiary. Depending on the settlement option of an annuity, payments may continue for a fixed period or for as long as the annuitant or another designated beneficiary lives, creating an ongoing income stream from the previously deposited funds.
When an annuity is established, payments may be immediate or deferred. Deferred annuities are established with a funding timeframe, called an accumulation phase. This is a period when deposits are made into the annuity to build up its value. Immediate annuities don’t have an accumulation phase because they are annuitized at the time of purchase. Typically, annuities only have cash surrender value during the accumulation phase. The pay-out phase (annuitization) begins at the time payments start going to the annuitant in accordance with the settlement option. The settlement option specifies the way the funds from the annuity will be paid out. It involves choosing the amount of each payment, how often payments will be made, and the length of time over which the payments will be made.
Revocable vs Irrevocable Annuities
If the terms of the annuity contract allow the fund to be surrendered, it is considered revocable.
If the terms of the annuity contract do not allow the fund to be surrendered, it is considered irrevocable.
Asset Treatment of Annuities
Annuities that can be surrendered (revocable annuities) are considered available, countable assets. The countable asset value of an annuity that can be surrendered is determined as follows:
Annuities that cannot be surrendered (irrevocable annuities) are considered unavailable assets. For long-term care cases, irrevocable annuities must be evaluated for divestment (see SECTION 17.2.6.14 IRREVOCABLE ANNUITIES). An irrevocable annuity is considered an unavailable asset on the date the settlement option was made final (typically the annuitization date).
Income Treatment of Annuities
Annuity payments are counted as unearned income if the annuity is an unavailable asset.
Annuity payments are not counted as unearned income if the annuity is an available asset.
For long-term care cases, annuities purchased or substantively changed after January 1, 2009, are subject to annuity disclosure (see SECTION 16.12.3.1 ANNUITY DISCLOSURE) and remainder beneficiary designation (see SECTION 16.12.3.2 REMAINDER BENEFICIARY DESIGNATION) requirements.
Annuities purchased prior to January 1, 2009, that have not been substantively changed since that date are not subject to LTC annuity disclosure or remainder beneficiary assignment requirements, but these annuities must still be reported and evaluated for their availability as income or assets.
The following actions are considered substantive changes:
The following actions are not considered substantive changes:
For annuities purchased or substantively changed after January 1, 2009, an annuity disclosure form (Annuity Information - Disclosure, F-10192) must be completed for each annuity owned by the LTC applicant/member or their community spouse.
If the LTC applicant/member or their community spouse does not complete the annuity disclosure form, they are ineligible for Medicaid coverage of long-term care services for failure to provide requested information.
For annuities purchased or substantively changed after January 1, 2009, the annuity contract must name the State of Wisconsin Estate Recovery program as the remainder beneficiary in the first position, or in second position if a community spouse or minor or disabled child is named in the first position, unless it is verified that the annuity has no death benefit.
To fulfill this requirement, the annuity owner must complete and submit the Medicaid Annuity Beneficiary Designation form (F-10191) to the IM agency. The form must be completed when the annuity is disclosed even if the State of Wisconsin Estate Recovery program is already named as the appropriate remainder beneficiary on the annuity contract.
If the completed F-10191 is received by the due date, the eligibility determination must be completed and the completed F-10191 along with the Medicaid Issuer of Annuity - Notice of Obligation form (F-10190) must be sent to both the annuity issuer and the Wisconsin Medicaid Estate Recovery program.
If the LTC applicant/member or spouse fails to cooperate with naming the state as remainder beneficiary when required, a divestment penalty period will be imposed. The divested amount is the full purchase price of the annuity.
Once the state has been designated as the remainder beneficiary, the annuity issuer must notify the agency about any changes made to that annuity to ensure the annuitant does not change the terms of the annuity beneficiary designation at a later date. The issuer acknowledges this obligation by completing and returning the Medicaid Issuer of Annuity - Notice of Obligation form (F-10190). When the IM agency receives a completed F-10190, or any other subsequent annuity information from the annuity issuer, it must be sent to the Estate Recovery program.
This page last updated in Release Number: 25-03
Release Date: 08/13/2025
Effective Date: 08/13/2025
The information concerning the Medicaid program provided in this handbook release is published in accordance with: Titles XI and XIX of the Social Security Act; Parts 430 through 481 of Title 42 of the Code of Federal Regulations; Chapters 46 and 49 of the Wisconsin Statutes; and Chapters HA 3, DHS 2, 10 and 101 through 109 of the Wisconsin Administrative Code.
Notice: The content within this manual is the sole responsibility of the State of Wisconsin's Department of Health Services (DHS). This site will link to sites outside of DHS where appropriate. DHS is in no way responsible for the content of sites outside of DHS.
Publication Number: P-10030