Long-Term Care Published: 2026-10-03

Medicaid Compliant Annuity: What Federal Law Requires

Written by Hans Goldstein, independent licensed insurance producer · CA license 4273294 · NPN 20602398
Published October 3, 2026

Short answer: under federal law (42 U.S.C. §1396p(c)(1)(F) and (G)), buying an annuity is treated as giving money away for Medicaid long-term care purposes unless the annuity is irrevocable and non-assignable, actuarially sound (it pays out within the owner’s life expectancy under Social Security actuarial tables), pays in equal amounts with no deferral or balloon, and names the state as remainder beneficiary (first, or second after a community spouse or minor or disabled child). States add their own rules, so this is always a job for an elder law attorney first.

Why a Medicaid annuity exists

When one spouse needs nursing home care, Medicaid counts the couple’s assets. Giving money away within the 60-month look-back creates a penalty period. A properly built single premium immediate annuity converts countable savings into an income stream, typically for the healthy spouse, without being treated as a gift. Built wrong, the same purchase counts as a transfer for less than fair market value and delays eligibility.

The federal requirements

Requirement	What it means in practice
Irrevocable	No cash-out or surrender after purchase.
Non-assignable	The payments cannot be sold or transferred to someone else.
Actuarially sound	The payout period does not exceed the owner’s life expectancy under the Social Security Office of the Chief Actuary tables.
Equal payments	Level payments for the term, no deferral and no balloon at the end.
State as remainder beneficiary	The state is named first for at least the Medicaid it paid, or second after a community spouse or minor or disabled child.

Source text: 42 U.S.C. 1396p(c)(1)(F) and (G). The application must also disclose any annuity the applicant or spouse holds.

Quick check: does this annuity pass the federal tests on its face?

Irrevocable (no surrender or cash value)

Non-assignable

Pays out within life expectancy

Equal payments, no deferral or balloon

State named as remainder beneficiary

Federal tests only. States can add requirements and interpret these differently. Passing this list is not a determination of eligibility. Have an elder law attorney review before purchase.

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A regular MYGA is not Medicaid compliant

A MYGA has a cash surrender value, so it is a countable asset. The same is true of most deferred annuities. A Medicaid annuity is a special-purpose immediate annuity, bought at the right moment in the application process. That timing and the state paperwork are why I only help with these alongside the family’s elder law attorney.

State rules matter

Medicaid is run by each state within federal rules, so asset limits, spousal allowances and annuity treatment differ. In California the program is Medi-Cal; check current rules with DHCS and the federal overview at Medicaid.gov.

Other ways to plan for long-term care

For people a few years away from needing care, asset-based coverage is often the cleaner route: see hybrid LTC annuities explained. For a surviving spouse’s income, see what happens to an annuity when the spouse dies and why immediate annuities are undersold.

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Hans Goldstein · 213-414-2808 · NPN 20602398, independent licensed insurance producer appointed with multiple carriers

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Frequently Asked Questions

What makes an annuity Medicaid compliant?

Under 42 U.S.C. 1396p, the annuity must be irrevocable and non-assignable, actuarially sound under Social Security life expectancy tables, pay equal amounts with no deferral or balloon payment, and name the state as remainder beneficiary in the first position, or second after a community spouse or minor or disabled child.

Is a MYGA countable for Medicaid?

Generally yes. A MYGA or other deferred annuity has a cash surrender value, so it is usually treated as a countable asset. A Medicaid compliant annuity is a special immediate annuity with no cash value.

Does the state get the money left in a Medicaid annuity?

If payments remain when the annuitant dies, the state named as remainder beneficiary is repaid up to the amount of Medicaid it paid. Anything above that goes to the other named beneficiaries.

Do I need an attorney for a Medicaid annuity?

Yes. State rules, timing within the application and spousal allowances decide whether the strategy works. Use an elder law attorney licensed in your state before buying.

Sources

Goldstein & Co. LLC dba Goldstein Insurance Services, CA lic. #4273294 · Hans Goldstein, NPN 20602398 · 213-414-2808 · hans@hansgoldstein.com

This page is general education. It is not tax, legal or investment advice and is not an offer or recommendation for any specific product. Calculator results are estimates from the stated assumptions, not quotes. Guarantees in a fixed annuity are contractual and are backed by the financial strength and claims-paying ability of the issuing insurance company. Annuities are not FDIC insured. Annuities have surrender charges and other limitations; read the contract and disclosure before you buy. Consult a tax professional or attorney about your situation.