Transfer of Assets Transfer of Assets When an A/R, A/Rs spouse or - - PDF document

Transfer of Assets

Transfer of Assets

When an A/R, A/R’s spouse or someone acting on his/her behalf makes a voluntary transfer of a countable asset for less than fair market value

Right of Rebuttal

• Agency presumption
• Client rebuttal

–Reasonable timeframe –Evidence

Assets Exempt From Transfer Penalty

• Exempt Resources
• Any countable resources up to the MA

level

• Resources transferred to a spouse

Assets Exempt From Transfer Penalty, cont’d

Resources transferred to a certified blind or certified disabled child of any age, or to a trust established solely for the benefit of such child

Assets Exempt From Transfer Penalty, cont’d

• Resources, but not income, transferred by an

applicant, for Medicaid Extended Coverage: – Total Asset Protection Policies: if A/R has reached their durational requirements, all resources are exempt – Dollar for Dollar Plans: Resources up to the amount paid out by the plan are exempt

• Transferred assets may be offset by any

remaining asset protection

Assets Exempt From Transfer Penalty, cont’d

Assets, other than a homestead, may be transferred into a trust for the sole benefit of a certified disabled individual under the age

• f 65 years

Homestead May be Transferred to:

• Spouse
• Child under age 21
• Certified blind or disabled child of any age

Homestead May be Transferred to: cont’d

• Sibling who lived in the home at least 1

year prior to institutionalization and has equity interest

• Adult child who lived in the home for 2

years prior to the institutionalization and provided care

Annuities and Transfer

• A/R or A/R’s spouse who annuitized an

annuity prior to 2/8/06 and within the look- back period –Will be subject to a transfer penalty unless annuity is actuarially sound

Annuities and Transfer, cont’d

• Actuarially Sound Calculations

–Determine total lifetime payments:

• Determine annual payment
• Multiply by life expectancy

–Compare total lifetime payments to annuity principal

Annuities and Transfer, cont’d

• Example – Actuarially Sound

– Female Applicant owns $150,000 Annuity – Payments started @ age 73 12/2005 (pre- DRA) – Payments - $200 per month – $200 x 12 = $2400/year x 14.16 (life expectancy @73) = $33,984 – This is NOT actuarially sound.

Annuity Transactions

Any action by the individual that changes the course of payment from the annuity or that changes the treatment of the income or principal of the annuity

Annuity Transactions, cont’d

• Includes:

–Purchases –Additions of principal –Elective withdrawals –Requests to change the distribution of the annuity –Elections to annuitize the contract

Transfer (Annuities purchased or transactions

• n or after 2/8/06)

A/Rs and their community spouses have to disclose any interest they have in an annuity

Transfer (Annuities purchased or transactions

• n or after 2/8/06), cont’d
• Annuities owned by either the A/R or the CS, when the

annuity is not a countable resource, will be treated as a transfer unless: – The State is named beneficiary in the first position OR; (cont’d) – Second position after a community spouse, minor child, or certified disabled child AND; – First position if such spouse or representative of child disposes of any interest for less than fair market value

Transfer (Annuities purchased or transactions

• n or after 2/8/06), cont’d

A/R or C/S is not required to name the State as beneficiary if the annuity is a countable resource

Transfer (Annuities purchased or transactions

• n or after 2/8/06), cont’d
• Example

– CSRA for CS = $74,820 – Total Countable resources = $65,000 which includes an annuity not in periodic payment status valued at $50,000 (owned by CS) – Since total countable resources are below CSRA, we can not require them to name state as beneficiary

Transfer (Annuities purchased or transactions

• n or after 2/8/06), cont’d
• Annuities purchased by or on behalf of an A/R

will be treated as a transfer unless the annuity is: – Retirement Annuity; or – Purchased with proceeds from:

• Individual retirement account; or
• Simplified employee pension plan; or
• Roth individual retirement account; OR…..

Transfer (Annuities purchased or transactions

• n or after 2/8/06), cont’d
• The annuity is:

–Irrevocable and non-assignable; –Actuarially sound; AND –Provide for payments in equal amounts during the term of the annuity with no deferral and no balloon payments

Assets Used to Purchase Loans, Promissory Notes and Mortgages

• Assets used by the A/R and/or their spouses as

defined above, will be treated as a transfer unless the repayment agreement: – Is actuarially sound; – Provides for payments to be made in equal amounts (no deferrals or balloon payments); and – Prohibits the cancellation of the balance upon the death of the lender

Look-back Period

• The sixty-month period immediately

preceding the date that an institutionalized individual is both institutionalized and has applied for Medicaid.

• Must look at transactions of $2,000 or more

– $2000 is a guideline, it does not mean that LDSS’s can’t look at amounts under $2,000

Look-back Period For Trusts and Annuities

• The look-back period for trusts and

annuities is 60 months

• Possible transfer for trusts is the date the

trust is funded

Financial Eligibility, Single SSI-R Individual

• Budget Type 04 / Case Count = 1
• Any excess resources and/or income are

compared to medical bills

• If medical bills exceed excess, A/R is
• therwise eligible
• If medical bills do not exceed excess, A/R

is not otherwise eligible

Financial Eligibility, Spousal

• Spousal impoverishment treatment of

resources

• Total Combined Countable Resources
• CSRA
• MA Level for 1

Net vs. Medical Bills

Financial Eligibility, Spousal, cont’d

• Example

$100,000 Current Resources

• 74,820 CSRA

25,180

• 14,550 Resource level for one

$10,630 vs. Nursing Home bill $16,000

• Client is otherwise eligible

Financial Eligibility, Spousal, cont’d

• If resource eligible, continue with income

calculations –Budget type 04 / case count = 1 calculations with institutionalized individual’s income only

Financial Eligibility

• Applicant is considered otherwise eligible

even if: –Third party insurance is paying, and there is no excess income to offset with medical bills –Excess/NAMI may be greater than the MA rate

Financial Eligibility, cont’d

$3000 MA Rate $5000 NAMI $7000 Nursing Home Private Pay Rate

• Client is otherwise eligible
• Since the NAMI is greater than the MA Rate,

Medicaid will pay $0

• Nursing Home can’t collect the difference

between the NAMI and private rate as client is eligible for MA

Look-back Period

For SSI-R individuals who were covered for the initial days of Nursing Facility services under Community Coverage with LTC, or Community Coverage with no LTC, the lookback begins the month of institutionalization

(10 OHIP/ADM-1)

Look-back Period Non-SSI-R Individuals, cont’d

An unmarried S/CC or ADC related RECIPIENT who requires temporary placement in a nursing home is budgeted under community rules, and, therefore will have no resource test or look-back period

Look-back Period Non-SSI-R Individuals, cont’d

• Unmarried S/CC or ADC RECIPIENTS

who are temporarily placed in a NH and subsequently become permanently absent will have no look-back until a disability determination is completed –Look-back begins the first day of the initial institutionalization

Look-back Period Non-SSI-R Individuals, cont’d

• Example

– Client (45) is an MA Recipient (S/CC) – Car accident April 2013 and needs Nursing Home Services – Submits medical evidence that they are temp placed – They will receive NH services under the S/CC category and are fully eligible

Look-back Period Non-SSI-R Individuals, cont’d

• In November, Permanent Absence is determined
• Disability review is initiated
• The look-back will begin April 2013 and go back

60 months to April 1st, 2008

• If a transfer is found, a penalty will be imposed
• No recovery is made from the period of time they

were receiving services under S/CC

Look-back Period Non-SSI-R Individuals, cont’d

Unmarried S/CC or ADC APPLICANTS who are in need of permanent nursing home care will have no coverage for this service until the individual is certified disabled

Calculation of Penalty Period

• Determine Uncompensated Value:

Fair Market Value

• Compensation Received

“Gross” Uncompensated Value

Calculation of Penalty Period, cont’d

• Example

$150,000 FMV house (no mortgage)

• 60,000 Nephew Paid

$90,000 Gross uncompensated value

Calculation of Penalty Period, cont’d

Gross Uncompensated Value

• MA Resource deficit
• Burial Fund (if none exists)

Uncompensated Value (UV)

Calculation of Penalty Period, cont’d

$14,550 MA level

• 2,200 Countable resources

12,350 Additional allowable countable resources $90,000 Gross Uncompensated value

• 12,350 Resource they can still have

$77,650

Calculation of Penalty Period, cont’d

• If no burial fund, allow another $1500

($3000 couple) $77,650

• 1,500

Burial Fund $76,150 Net uncompensated value

Calculation of Penalty Period, cont’d

Uncompensated Value = Penalty Period Regional Rate

(GIS 14 MA/03)

Calculation of Penalty Period, cont’d

$76,150 Net Uncompensated Value ÷ 9,212 Albany regional rate 8.27 Months Penalty

Calculation of Penalty Period, cont’d

Partial month of a penalty is converted into a dollar amount to be added to the NAMI for an Institutionalized A/R

Calculation of Penalty Period, cont’d

• Calculation for a partial month penalty

– 8.27 months penalty from previous example $9212 X 8 (mos.) = $73,696

Regional Rate (Albany)

$76,150 Net UV

• 73,696

$ 2,454 Partial Month Penalty to be added to NAMI

Penalty Period for Transfers Made On or After February 8, 2006

• The first day of the month that the

institutionalized individual is otherwise eligible for nursing home coverage, but for the imposition of the penalty,

• r
• Begins on the first of the month after the

month of transfer Whichever is later

Penalty Period for Transfers Made On or After February 8, 2006, cont’d

• A/R applies October 2012
• IS owns $50,000 annuity (State is named

beneficiary)

• A/R renews October 2013; we learn annuity was

transferred to the daughter May 2013

• $50,000÷$9212(Albany Reg. Rate)= 5.43 mo.
• Penalty period is June – October with partial to

November

Penalty Period for Transfers Made On or After February 8, 2006, cont’d

• Start date is the month following the month of

the transfer

• Since A/R is a recipient, you must issue a 10 day

notice before decreasing coverage

• The penalty will still run June – October but with

a notice issued in October, the penalty will only be for November (partial month)

• May recover the amount paid June – October as

Medicaid incorrectly paid

Penalty Period for Transfers Made On or After February 8, 2006, cont’d

• Individuals initially covered under community

coverage w/LTC services – If penalty falls in first 29 days of coverage, coverage can NOT be decreased until 10 day notice has been given – The 10 day notice requirement does not apply to determinations made after the 29 day period

Penalty Period for Transfers Made On or After February 8, 2006, cont’d

• Client enters NH for rehab Nov. 15
• MA Coverage is CC w/LTC, which covers

the first 29 days of rehab; 29 days will be

• ver December 13
• On December 1st, it is determined that the

rehab is expected to last for 60 days; an increase in coverage is requested

Penalty Period for Transfers Made On or After February 8, 2006, cont’d

• A prohibited transfer is discovered
• It is determined that the penalty should

begin November 1st

• No reduction in coverage can begin until

10 day notice is given

• Recover the amount paid during penalty

period as Medicaid incorrectly paid

Penalty Period

Once a penalty period begins, it continues to run regardless of whether or not the individual remains institutionalized or eligible for MA

Penalty Period, cont’d

• If transferred assets are returned to A/R,

recalculate penalty period, BUT count returned assets as if available all along

• For individuals with transfers made on or

after 2/8/2006, who are not “otherwise eligible”, no penalty period is calculated

Penalty Period, cont’d

• Client applies January 2014
• A/R made a prohibited transfer of $75,000,

September 2013

• $75,000 ÷ 9212 (reg. rate)Penalty is 8 months

($73,696) plus a partial month of $1,304

• Client was in receipt of NH services in January

2014 and otherwise eligible

• Penalty runs from January through August
• $1304 partial is added to September’s NAMI

Penalty Period, cont’d

• March 2014, $50,000 of the transferred asset

is returned to them

• Penalty needs to be recalculated
• Return to the first month of penalty period

and determine eligibility as if they had the money at that time

• $50,000 causes the client to have excess

resources January through May 2014 (using private pay rate of $10,000)

Penalty Period, cont’d

• They are no longer “otherwise eligible”
• The remaining $25,000 of prohibited

transfer is recalculated beginning in June

• $25,000 ÷ $9212 (reg. rate)=2.7
• The adjusted 2.7 month penalty for the

remaining $25,000 would be June and July 2014 with a partial of $6,576 added to the August NAMI

Penalty Period Between Spouses

If the C.S. is in need of nursing facility services, any remaining penalty period established for the I.S. must be apportioned equally

Penalty Period Between Spouses, cont’d

• Penalty period is calculated as 10 month penalty for IS

IS J F M A M J J A S O X X X X X X X X X X

• CS enters a Nursing Home in May
• Each spouse would have a penalty as follows:

– IS – penalty now runs January through July – CS – penalty from May through July

• Total between the 2 still equals 10 months

Penalty Period Between Spouses, cont’d

1st Spouse J F M A M J J A S O = 7 mos. X X X X X X X 2nd Spouse M J J = 3 mos. X X X Total = 10 Months

Penalty Period Between Spouses, cont’d

If one spouse is no longer subject to a penalty (dies), the remaining penalty period must be applied to the remaining spouse

Budgeting During Penalty Period

• Single institutionalized A/R’s receive

community budgeting

• Spousal cases receive chronic care

budgeting; the I.S. is given the MA level for

• ne, minus $20 income disregard

–Eligible for coverage code 10 or 23

Stream of Income

• Stream of income such as a pension, not

dividends or interest on resources: –Date of transfer is date income was available and waived

• Lump sum income transferred in month

received, use SSI income disregards

Stream of Income, cont’d

• Multiply annual income transferred by

years of life expectancy

• May be allowed MA resource deficit and a

burial fund

Multiple Transfers On or After February 8, 2006

• Multiple transfers of assets must be

accumulated and treated as one transfer –Regardless of whether or not the amount adds up to the regional rate

• Total amount will be used to determine the

period of ineligibility

Transfers and Life Estate

• Life estate is a limited interest in real

property

• Usually life estates are in the form of a life

lease on property the person is using, or has used, for a homestead

Transfers and Life Estate, cont’d

• Life estate is not a countable resource
• When A/R makes a prohibited transfer of

property they own, but retains a life estate, credit will be given for the life estate retained

Transfers and Life Estate, cont’d

• If A/R makes a prohibited transfer of property

but retains life estate, calculate penalty as follows: FMV of property at time of transfer X Life estate multiplication factor Value of life estate

(GIS 13 MA/06)

Transfers and Life Estate, cont’d

• Determine the IRS Code 7520 interest rate

that applies to the month and year of transfer to be used in the life estate computation

• Using table S, (based on the most recent

mortality table 2000CM), determine the life estate multiplication factor based on the appropriate interest rate

Transfers and Life Estate, cont’d

Equity value of property at time of transfer

• Value of life estate

Value of transferred property

Transfers and Life Estate, cont’d

Value of transferred property

• Compensation received
• MA resource deficit
• Burial fund (if applicable)

Uncompensated Value (UV) of transfer of property

Transfers and Life Estate, cont’d

• A/R(s) who prematurely terminate their

rights to life estates will be assessed a penalty FMV of property at time life estate is prematurely terminated X Life estate multiplication factor Value of life estate at time of early termination

Transfers and Life Estate, cont’d

Value of life estate (at time of early termination)

• Compensation received
• MA Resource Deficit
• Burial Fund (if applicable)

Uncompensated Value (UV)

Transfers and Conditional Life Estate

• Conditional life estates terminate upon a

specific event other than death, e.g., the A/R has life estate until: –Entering a NH; –No longer residing on the property on a permanent basis; or –Needing MA

Transfers and Conditional Life Estate, cont’d

• During the look-back period, if A/R has

transferred their property but retained conditional life estate: –If the specific event has not occurred, no credit for life estate is given –When the specific event occurs, no penalty is assessed

Transfers and Conditional Life Estate, cont’d

• During the lookback period, if conditional

life estate ended due to occurrence of the specific event: –Calculate the exact value of the life estate that the A/R received and subtract from the original value of life estate to determine transfer amount

Transfers and Conditional Life Estate, cont’d

FMV of property at time of transfer x Life estate mult. factor Value of Life estate

Transfers and Conditional Life Estate, cont’d

• Divide the value of the life estate by the

A/R’s life expectancy at the time of transfer to get the yearly value of life estate

• Divide the yearly value by 12 to get the

monthly value

Transfers and Conditional Life Estate, cont’d

• Determine the number of months life

estate was actually used

• Multiply monthly value by number of

months used to get the actual value of conditional life estate used

Transfers and Conditional Life Estate, cont’d

FMV of property at time of transfer

• Existing mortgage

A/R’s Equity value

Transfers and Conditional Life Estate, cont’d

Equity value of homestead at time of transfer

• Value of life estate used

Transferred amount of homestead

Undue Hardship Exists When:

• Individual is otherwise eligible for MA and
• Despite his/her best efforts, can not get

transferred assets returned or to receive FMV, or to void trust and

Undue Hardship Exists When: cont’d

The transfer penalty would deprive the institutionalized individual of food, clothing, shelter, or other necessities of life or

Undue Hardship Exists When: cont’d

The institutionalized individual is unable to

• btain appropriate medical care such that

his/her health or life would be endangered without MA to cover nursing facility services

Undue Hardship Can Not Be Claimed:

• If the A/R failed to fully cooperate, to the

best of his/her ability

• If after payment of medical expenses, the

individual’s or couple’s income and/or resources are at or above the allowable MA standard

Undue Hardship Can Not Be Claimed: cont’d

If the only undue hardship is the A/R or their spouses ability to maintain a pre-existing life style