NJ Restrictions against Medicaid Annuities held Invalid

The New Jersey Appellate Division held that a Medicaid annuity should not be counted towards a patient's economic resources in determining Medicaid eligibility. In Estate of F.K. vs. Division the Court held using immediate annuities as an asset protection tool is permitted under federal law and invalidating New Jersey's Medicaid regulations prohibiting such annuities.

In the FK case, the husband entered a nursing home while suffering from Alzheimer's disease. His wife bought an irrevocable, non-assignable immediate annuity for $274,000 tied to the wife's life expectancy. The monthly income from the annuity was payable to the wife. Under federal law, the purchase of the immediate annuity made the husband eligible for Medicaid to cover his nursing home costs. The New Jersey agency denied Medicaid coverage by considering the annuity as the husband's assets. The Court overturned the agency and granted Medicaid eligibility.