Background of this blog
N.J. hates SPIA’s because they allow a Medicaid applicant to avoid a forced spenddown of savings. In a recent case, as part of an asset protection plan, a Medicaid applicant purchased a SPIA annuity to provide income during an expected penalty period. Part of the annuity contract contained a provision granting a 30-day right to review the contract and a separate right to waive that 30-day right. The applicant in this case signed a form that allowed her to voluntarily waive her thirty-day right to cancel the contract, thereby making the annuity immediately irrevocable. Because of the thirty-day cancellation right, the County Board of Social Services penalized the applicant for electing to waive the thirty-day period and delayed eligibility for 30 days.
On appeal, the Administrative Law Judge reversed the County.
The Commissioner of the New Jersey Department of Banking and Insurance (DOBI) specifically approved the annuity and its feature that allows individuals to waive their 30-day right to cancel, pursuant to N.J.S.A. 17B:25-39, thereby making the annuity irrevocable. The waiver stated, “I elect to make this contract irrevocable from the issue date. I understand by making this election I give up all rights to cancel the contract and receive a return of premium under the Thirty Day Right to Examine Your contract provision of the annuity contract.”
If the applicant had not signed this 30-day waiver, the county’s calculated effective date of eligibility would have been appropriate, as the annuity was revocable for a 30-day period. However, when he signed the waiver, he waived his right to cancel the annuity and receive a return of the premium. Once waived, neither Petitioner nor anyone else had access to the premium payment as of the annuity’s issue date. Accordingly, the court and the state agreed that the annuity became immediately irrevocable as of the issue date. They reversed the penalty imposed by the County Board of Social Services.
To discuss NJ Medicaid, please contact Fredrick P. Niemann, Esq. at (732) 863-9900 or email him at fniemann@hnlawfirm.com. Please ask us about our video conferencing or telephone consultations if you are unable to come to our office.
By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold Township, Monmouth County, NJ Medicaid Attorney