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Sep 8, 2023 by |

San Francisco Financial Elder Abuse And Annuity Attorney: Beware Of Misinformation Regarding “Medicaid Annuities”


Misleading Life Insurance Agent Representations

California Law On “Medicaid Annuities”

Other Pitfalls Of Deferred Annuities For Seniors

Whenever a life insurance agent or financial advisor of any kind suggests an annuity for you, be wary, especially if you are retired or nearing retirement.  Be especially cautious if the annuity is recommended as a way to achieve Medicaid (Medi-Cal, in California) eligibility for long-term care like a nursing home. Sales tactics for these policies may be aggressive and life insurance agents may try to rush a senior into a transaction or fail to provide all the information necessary to understand how a policy works and whether or not it is a way to achieve Medicaid, or in California Medi-Cal, planning. Evans Law Firm, Inc. generally recommends against deferred annuities for older consumers because they are expensive and complicated and because these contracts tie up a senior’s money for years.  Unsuitable policies and deceptive or aggressive sales tactics may also violate legal protections for older consumers in particular. Cal. Weld. & Inst. Code § 15610.30 (definition of financial elder abuse); Cal. Ins. § 790 et seq. (Unfair Insurance Practices Act).  Senior victims may sue for damages and other relief including awards of attorneys’ fees and expenses for bringing your case.  Cal. Welf. & Inst. Code § 15657.5.  If you are over 60, live in Marin or throughout the State of California and own a deferred annuity, call us today at 415-441-8669 (or toll free at 1-888-50EVANS) for a free review of your policy. 

California Law On “Medicaid Annuities”

California only allows you to exclude assets from Medicaid consideration by purchasing certain types of immediate annuities, which start payments immediately, provide payments in equal amounts, and do not have a term longer than the purchaser’s life expectancy. See Cal. Code Regs. Tit. 22 §50489 et seq. A deferred annuity is not a “Medicaid annuity” under California law.

An annuity purchased on or after September 1, 2004, shall be subject to recovery by the state upon the annuitant’s death under the regulations of the Medi-Cal Recovery Program. Income derived from the annuity must be used to meet the annuitant’s share of costs and, if the annuitant is married, the income derived from the annuity may impact the minimum monthly maintenance needs of the annuitant’s community spouse. An annuity purchased by a community spouse on or after September 1, 2004, may also be subject to recovery if that spouse is the recipient of past or future Medi-Cal benefits. Medicaid annuities can have complex implications and their effectiveness in achieving Medicaid eligibility can depend on various factors, including the individual’s specific financial situation and the state’s Medicaid rules. Also, purchasing a Medicaid annuity will require you to pay a number of costs and fees. These vary depending on the annuity provider and the specific terms of the annuity contract.

Deferred Annuity Downsides

Three features of particular concern for senior policyholders are:

  1. Surrender Penalties. A surrender charge is a fee assessed on investors assets if they move money out of a deferred annuity. The surrender charges are often 5 to 7 percent of assets in year one and decline one percent a year until they go away over the next 5 to 7 years. If an older person needs their money for an emergency or because their living and care expenses have increased beyond what they expected, will be penalized by an early surrender of their contract.  Direct mutual fund investments do not penalize withdrawals.
  2. Commissions And Deferred annuities are expensive. First, a selling life insurance agent receives a significant commission on the sale of the contract to you which can be around 8%. That comes straight out of your premium.  Yearly expenses can be high too. Conversely, annuity fees can run in the range of 2.5 percent to 3 percent a year (versus 1-1.2% average on mutual funds).  If a life insurance agent sells you additional policy features, known as “riders,” you will pay more for those too, and your return may be eroded by another 1-2% or more annually.
  3. Participation Rates And Caps On Performance. Carriers will typically impose a “participation rate” set below 100% so if the index you chose increases you will not get a 100% of that return, but a lower percentage. Annuity providers also determine a “cap rate,” an interest rate that limits the growth of an indexed annuity. This cap ensures that the annuity provider can meet their obligations and still make a profit on the product.

Contact Us

If you are over 60 and live in San Francisco or elsewhere in Southern California or throughout the State of California and have a deferred annuity or universal life insurance contract, we can review your contract for free.  You can reach Ingrid M. Evans at Evans Law Firm, Inc. at (415) 441-8669, or toll free at 1-888-50EVANS or by email at <a href=””></a>.

Some significant issuers and distributors of fixed, variable and fixed indexed deferred annuities in California are listed below.  We are not in any way suggesting that any of these carriers or distributors has done anything wrong.  The list is provided solely as a reference for our readers.

AIG/American General Life Insurance Company

Allianz Life Insurance Company of North America

American Equity Investment Life Insurance Company

American General Life Insurance Company/AIG

American International Group, Inc. (AIG)

American National Life Insurance Company

Athene Annuity & Life Assurance Company

Athene Annuity and Life Company

Athene USA

Aviva Life Insurance Company

AXA Equitable Financial Services, LLC

AXA Equitable Life Insurance Company/AXA US

AXA Advisors, LLC

Brighthouse Financial, Inc./MetLife

EquiTrust Life Insurance Company

Fidelity & Guaranty Life Insurance Company

Genworth Financial, Inc.

Genworth Life and Annuity Insurance Company

Genworth Life Insurance Company

Guggenheim Partners, LLC

Guggenheim Partners/Security Benefit Life Insurance Company

ING USA Annuity and Life Insurance Company

Jackson National Life Insurance Company

John Hancock Life Insurance Company

Lincoln Benefit Life Company

Lincoln Financial Group

Massachusetts Mutual Life Insurance Company

Metlife/Metropolitan Life Insurance Company/Brighthouse Financial, Inc.

Minnesota Life Insurance Company

Nationwide Investor Services Corporation (NISC)

Nationwide Life and Annuity Insurance Company

Nationwide Life Insurance Company

New York Life Insurance Company

Northwestern Mutual Investment Services, LLC

Northwestern Mutual Life Insurance Company

Northwestern Mutual Wealth Management Company

Pacific Life & Annuity Company

Pacific Life Insurance Company


Security Benefit Corporation

Security Benefit Group, Inc.

Security Benefit Life Insurance Company/Guggenheim Partners

Security Investors, LLC

Security of Denver Life Insurance Company/Voya

Transamerica Life Insurance Company

Voya Financial Advisors

Voya/Reliastar Life Insurance Company

World Financial Group Insurance Agency, Inc.

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