Recently, the reasons I've seen in an immediate annuity being considered in net worth calculations have ranged from the policy containing a beneficiary designation to the policy providing an income stream to the owner. The fictional value is then determined based on a range of equally absurd factors - sometimes the investment amount, sometimes the amount of future payments left.
38 CFR 3.275 states that in determining what to include as a portion of the claimant's net worth, consider "whether the property can be readily converted into cash at no substantial sacrifice..."
At this time we can only speculate as to why the VA has come down on immediate annuities. Some believe an internal memo striking out the use of annuities was published among the VA processors. And we all recall the GAO report released in May of 2012 regarding the improvements needed in the VA pension program. In the report, an emphasis was placed on how some products, such as deferred annuities, may not be suitable for the elderly. Some believe that report may have caused VA processors to simply count all annuities, even the appropriately structured ones, as a portion of the claimant's net worth.
Notwithstanding the above, it is my opinion that in the cases described above a letter should be obtained from the insurance company as to the cash value of the policy, and the insured's ability to access the single premium investment. That letter should reflect a cash value of $0.00, and the insured's inability to access the principal. If you have worked with my office in obtaining an annuity that is currently under scrutiny, don't hesitate to call and I will offer assistance without hesitation.