Exception: Annuities consisting of tax-qualified funds usually do not need to be actuarially sound.
I've seen confusion surrounding what constitutes an annuity period certain to be structured "within" a Medicaid life expectancy. Usually the annuity can be shorter than the owner's Medicaid life expectancy, but never longer. Three states have diverted from the general rule, and impose even greater restrictions, to-wit:
North Dakota: The State of North Dakota requires that an annuity term be within 85% of the individual's Medicaid life expectancy. See North Dakota Medicaid Policy Manual § 510-05-70-45-
Oregon: The State of Oregon requires that an annuity term be within 12 months of the individual's Medicaid life expectancy. See Oregon Administration Code 461-145-0020.
Washington: The State of Washington requires that an annuity term be not less than five years if the Medicaid life expectancy of the annuitant is at least five years, or have a term equal to the life expectancy of the annuitant, if the Medicaid life expectancy of the annuitant is less than five years. See Washington Administrative Code 388-561-0201.
Determining if an annuity is actuarially sound is quite simple to do. Multiply the monthly payout by the period certain, and if that amount exceeds the initial investment, and the term is within the owner's Medicaid life expectancy, the annuity is actuarially sound. For example:
John Smith, a 92-year-old, invests $100,000 into an annuity. His contract outlines payments of $2,803.48 over a term of 36 months.
36 X $2,803.48 = $100,925.28 > initial investment of $100,000
John's Medicaid life expectancy, according to the tables published by the Social Security Administration, is 3.46 years/41.52 months. As such, he will be receiving more than he invested, within his Medicaid life expectancy.