Medicaid Compliant Annuity Kansas: Rules for Trusts and Personal Care Agreements

When Annuities Count as Available Resources

Under KEESM 5633 and 5722, the KanCare Clearinghouse treats single-premium immediate annuities as available countable resources unless they meet specific compliance requirements. An annuity that fails any of these tests is valued at its cash surrender or account balance and counted against the $2,000 asset limit — which can immediately disqualify your parent from Medicaid.

To be excluded from countable assets, a Medicaid-compliant annuity must meet all four criteria:

1. Irrevocable and non-assignable. The annuitant cannot cancel the contract, withdraw the principal, or transfer ownership.
2. Actuarially sound. The contract must be structured to return the full principal and interest within the annuitant's life expectancy per SSA actuarial tables. An annuity that pays out over 20 years for an 85-year-old fails this test.
3. Equal monthly payments. Distributions must be approximately equal each month — no balloon payments, deferred start dates, or graduated schedules.
4. Kansas named as primary remainder beneficiary. The state of Kansas must be designated as the primary beneficiary for recovery of Medicaid costs if the annuitant dies before the contract pays out. If there is a surviving spouse or a minor/disabled child, the state can be secondary — after those individuals — but must still be named.

This last requirement is the one families most often overlook. An annuity purchased without the required Kansas remainder-beneficiary designation does not meet the compliance test. Restructuring an existing annuity to add this designation may be possible, but confirm the required steps with the Clearinghouse before relying on the annuity for eligibility.

How the Community Spouse Uses Annuities

The most common legitimate use of a Medicaid-compliant annuity is for the community spouse. Here is the scenario: a couple has $250,000 in countable assets. The CSRA allows the community spouse to keep $162,660. The remaining $87,340 must be spent down.

One approach is to convert $87,340 into a Medicaid-compliant annuity in the community spouse's name. The annuity converts a lump-sum countable asset into a stream of monthly income for the community spouse. Because the annuity meets all four compliance criteria, it is no longer counted as an asset — it is now income.

The annuity payments become part of the community spouse's monthly income, which is protected by the MMMNA rules. If the payments push the community spouse's income above the MMMNA ceiling ($4,066.50 in 2026), the excess may be counted toward the institutionalized spouse's patient liability.

This strategy works, but it requires precise structuring. Work with a financial professional who understands Medicaid annuity rules — a standard commercial annuity from an insurance agent will almost certainly fail the compliance test.

Trust Treatment Under Kansas Rules

Revocable living trusts offer no Medicaid protection in Kansas. Assets in a revocable trust are treated as fully available countable resources because the grantor retains the power to revoke the trust and access the assets.

Irrevocable trusts can effectively shield assets, but the transfer into the trust is treated as a gift for lookback purposes. If the trust is funded within the 60-month lookback window, the full value of the transferred assets triggers a penalty period. For an irrevocable trust to work as a Medicaid planning tool, assets must be transferred at least five years before the anticipated Medicaid application.

An irrevocable trust properly established outside the lookback window removes assets from both the countable resource calculation and the expanded medical assistance estate — meaning KDHE cannot recover against those assets after death.

Personal Care Agreements

Families frequently pay a child or relative for caregiving, which seems straightforward — the parent needs help, the child provides it, and payment is fair. But the KanCare Clearinghouse treats any payment to a family member as an uncompensated transfer unless a formal Personal Care Agreement meets every requirement under KEESM 5430(6):

• Written contract executed before any services are provided or paid for. A retroactive agreement for care already delivered is not valid.
• Specific services and rates detailed in the contract. "General caregiving" at an undefined rate will be treated as a gift. List each service — bathing, meal preparation, medication management, transportation — and the hourly or daily rate.
• Payment rate at fair market value. Use the prevailing home health aide rate in your Kansas county. If no local rate data is available, the federal minimum wage is the default. Rates significantly above market draw scrutiny.
• Payment only after services are rendered. Prepaying a year of caregiving in advance is treated as a transfer, even with a valid contract.
• Caregiver reports earnings as taxable income. Keep records showing that the caregiver reported the payments as taxable income.
• Agreement is revocable and terminates at the beneficiary's death. The contract cannot guarantee payments beyond the care recipient's lifetime.

A properly structured Personal Care Agreement is one of the most effective spend-down tools available — it reduces countable assets while compensating a family member for real work. But an informal arrangement, or a contract that skips any of these requirements, converts legitimate care payments into a penalty-triggering transfer.

The Kansas Medicaid Long-Term Care & Asset Protection Guide includes a Personal Care Agreement template that meets KEESM 5430(6) requirements, along with rate benchmarks and a service log format.

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