Since the beginning of 2005, New Jersey Appellate Courts have struck down two separate state regulations relating to the use of annuities for Medicaid planning by holding that the regulations violate federal law.

On January 4, 2005, the appellate court ruled that a state regulation capping the amount of funds that a Medicaid applicant may use to purchase a commercial annuity contravenes federal law. Estate of F.K. V. Division of Medical Assistance and Health Services (App. Div. No. A-1004-02T5).

Then on January 21, 2005, in the matter of A.B. v. Division of Medical Assistance and Health Services (App. Div. No. A-4973-02T2), the appellate court held that federal law prohibits the State of New Jersey from requiring that it be named as the remainder beneficiary of an actuarially sound commercial annuity purchased by the community spouse of a Medicaid applicant.

In both cases, Medicaid applicants successfully challenged state regulations which went far beyond what federal law provided and which were used to deny Medicaid eligibility for the applicant. The courts found that the State exceeded its authority and that the regulations were improperly drawn or enforced.