Clear Money Guide
What this guide covers
A quick view of the questions and evidence developed below.
Updated August 3, 2026. Quick answer: a Medicaid-compliant annuity converts countable savings into an income stream so it is no longer a countable resource. Federal law sets four hard conditions, and the one that surprises people is that the State must be named as a remainder beneficiary for what it pays out. This is a specialised legal instrument, not a retail product, and it is not the kind of annuity sold as an investment.
The conditions, from the statute
the annuity—(I) is irrevocable and nonassignable; (II) is actuarially sound (as determined in accordance with actuarial publications of the Office of the Chief Actuary of the Social Security Administration); and (III) provides for payments in equal amounts during the term of the annuity, with no deferral and no balloon payments made … the State is named as the remainder beneficiary in the first position for at least the total amount of medical assistance paid on behalf of the institutionalized individual under this subchapter; or … the State…
— 42 U.S.C. 1396p(c)(1)(F)-(G)
Four requirements on the annuity itself: irrevocable and non-assignable — you cannot undo it or sell it; actuarially sound, measured against the Social Security Administration’s own actuarial tables; and equal payments with no deferral and no balloon, so it cannot be structured to pay out mostly at the end.
And the State gets the remainder
This is the condition that makes it a genuinely different instrument. The State must be named as remainder beneficiary in first position for at least the total Medicaid paid on the person’s behalf — or in second position after a community spouse or a minor or disabled child, moving to first if that person disposes of the remainder for less than fair market value.
So this is not a way to keep money from the State. It is a way to convert a resource into income during life, with the State standing behind what it spent. Anyone describing it as sheltering assets from Medicaid is describing something the statute does not permit.
What it is not
It is not the annuity your bank or an insurance agent sells as a retirement product. Deferred annuities, indexed annuities, variable annuities and anything with a surrender value you can access do not meet these conditions. Buying the wrong product in the belief it will help can create a transfer penalty instead.
Run the numbers against the rest of the plan
What to do with savings that sit above a limit depends on income, on a spouse’s position and on what the money is meant for, and an adviser can weigh those together before a step is taken that is hard to reverse.
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Why this page ends by telling you to get a lawyer
Because the conditions are exact, the instrument is irrevocable, the consequences of getting it wrong are a penalty period rather than a refund, and states apply the rules with real variation. This is the clearest case in the whole subject for a qualified elder-law attorney in your own state.
We are not going to route you anywhere for that. We do not take a fee for referrals and we are not going to send someone in a crisis into a funnel. Your state bar association maintains a referral service, and elder law is a recognised speciality with its own certification.
Related: the overview · what a transfer penalty costs · the resource allowance.
General information drawn from federal statute and regulation, not legal advice. Medicaid long-term-care eligibility is administered by each STATE within federal rules, and states differ materially – on the resource allowance, on how income is counted, and on whether some strategies are recognised at all. Federal figures are adjusted annually; every figure here is labelled with what it is and when it applied. Decisions in this area are hard to reverse and often need a qualified elder-law attorney in your own state. We sell nothing on these pages and we do not refer you anywhere for a fee.
An annuity is one answer to a transfer penalty, and the size of the problem it is solving comes from the state’s own figures: the penalty divisor, published for every state including Alaska, Delaware, Kentucky, Mississippi, Vermont, Wyoming, and the excess income rule that applies where income runs over the limit, including South Carolina, Tennessee, Vermont.
The state-by-state estate-recovery comparison covers all 51 jurisdictions as of September 3, 2026. The seven added that day: Medicaid estate recovery in Arkansas (probate estate only), Medicaid estate recovery in Colorado (probate estate only), Medicaid estate recovery in Connecticut (probate estate only), Medicaid estate recovery in Delaware (probate estate only), Medicaid estate recovery in Mississippi (probate estate only), Medicaid estate recovery in Virginia (expanded estate) and Medicaid estate recovery in West Virginia (probate estate only).