If your client is facing a long-term care situation or a terminal illness, and has entered a nursing home or hospice, the surrender charge may be waived if the tax-deferred annuity contains a nursing home confinement or terminal illness rider. For the rider to be applicable, the stay in the nursing home or terminal illness condition must be for a continuous 90-day period. A careful review of the contract will disclose the actual requirements.
If the tax-deferred annuity has been annuitized, the aforementioned rules no longer apply. In other words, the insurance company that issued the tax-deferred annuity contract will no longer cash it out, as a result of a formal request or nursing home confinement. The only alternative at that point is to get the annuity contract valued on the secondary market by a company such as J.G. Wentworth, and sell it to a family member or to the company that valued it. However, if the annuity contract involves tax-qualified funds, even companies like J.G. Wentworth are not willing to value or purchase it. The reason for this relates to the fact that none of the funds have ever been subjected to income tax, and a tax-qualified account cannot be alienated, assigned, pledged, or transferred without creating a prohibitive transfer.
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Krause Financial Services specializes in helping families qualify for Medicaid benefits through the use of Medicaid Compliant Annuities, and Veterans Aid & Attendance benefits through the use of various life and annuity insurance products.