Assignable vs Cash Value: What's the Difference?

Nov. 1, 2012 - PRLog -- Most of you are aware of the new VA Annuity (http://www.medicaidannuity.com/Blog/tabid/76/entryid/183/The-New-VA-Annuity-Veterans-Benefits-Planning-with-Unmatched-Flexibility.aspx) available.  For those that aren't, it's essentially a traditional immediate annuity - revocable and assignable, but still offering zero cash value.  By remaining revocable and assignable it provides flexibility for the unknown, and leaves the door open to multiple planning options.  The special part about it is at any time the insured can "flip a switch" and make it Medicaid compliant.

I've been receiving many inquiries through the Ask Dale (http://www.medicaidannuity.com/LinkClick.aspx?link=102&tabid=76) section of this site relating to how the product works.  Many are asking "if it's assignable, isn't there a cash value?"  The answer is "no."  We're so used to adhering to strict requirements with respect to the use of annuities in Medicaid planning, it seems so foreign not to do the same in Veterans Benefits planning.

What it means when an annuity is assignable.

An assignable immediate annuity can be sold on the secondary market.  Companies such as J.G. Wentworth actively purchase assignable, revocable, immediate annuities.  The insured "assigns" their interest in the annuity to J.G. Wentworth, who then provides the insured with a lump sum of cash.  The lump sum is usually far less than the insured would receive by the end of the annuity, but some are willing to accept the discounted value for the convenience of the lump sum.

What it means when an annuity has cash value.

An annuity has cash value if the insured can contact the insurance company and access their annuity investment at any time.  Traditionally, this is only possible where tax-deferred annuities are concerned.  If you recall, tax-deferred annuities are lump sums of cash sitting and accruing interest.  A surrender charge is usually involved, but the insured is still able to access their investment.

As you can see, the two are not one in the same.  I hope that this provides a better understanding of the new VA Annuity (http://www.medicaidannuity.com/Blog/tabid/76/entryid/183/...).  As always, please feel free to leave any comments below.