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 allowing a thirty-day right to examine the contract and also a separate right to waive the 30 day right to review. The applicant in this case signed a form which allowed her to voluntarily waive this thirty-day right to cancel the contract, causing the annuity to become immediately irrevocable. Because of the thirty-day cancelation right, the County Board of Social Services penalized applicant’s election 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 allowing individuals to waive their 30 days right to cancel their annuity, pursuant to N.J.S.A. 17B:25-39, thus 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 effective date of eligibility as calculated by the county would have been appropriate, as the annuity was revocable for a thirty-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 issue date of the annuity. Accordingly, the court and state agreed that the annuity became immediately irrevocable from 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