554          TRANSFER OF ASSETS

 

An individual who isIndividualized Supports institutionalized or receiving home and community based ( HCB ) waiver services and who transfers income or resources for less than fair market value may be subject to a penalty that results in a period of ineligibility for institutional or HCBHome and Community-Based services.  In order for a penalty to apply, the transfer must have occurred within the look-back period.

 

Medicaid transfer of assets rules apply to all individuals eligible under the Special Long Term Care eligibility category and to all individuals receiving HCBHome and Community-Based waiver services, regardless of their eligibility category.

 

This section explains how to treat a transfer of asset for less than fair market value and includes policies in effect before and after implementation of the Deficit Reduction Act of 2005 provisions.

 

This section contains the policy and procedures for determining the following:

 

 

554 A.      DEFINITION OF TERMS RELATED TO TRANSFER POLICY

 

Annuity - An annuity is a contract. An individual pays an entity a lump sum of money in return for the right to receive fixed, periodic payments, either for life or for a term of years.

 

Compensation - Something received as payment for an asset.  Payment is usually considered to be cash, but other forms of payment include in-kind income, real or personal property, support and maintenance, services, or assumption of a legal debt.

 

Community Spouse -  The spouse of an applicant or recipient of long-term care Medicaid.  A community spouse resides outside of an institution and is not receiving HCBHome and Community-Based Waiver Services.

 

Equity - The equity of real or personal property is the fair market value (see definition below) less any encumbrances (mortgages, liens, or judgments) on the property.

 

Fair Market Value - Fair market value is current market value of a resource at the time the resource is transferred.  The current market value of a resource is the going price for which it can reasonably be expected to sell on the open market in the geographic area involved.

 

Legal Representative - A person legally authorized to execute a binding contract for the individual, such as (but not limited to) a legal guardian, parent of a minor child, power of attorney, or trustee managing the individual's assets.  Legal authorization requires a legal document or court action except for parents of minor children.

 

Life Estate - Under a life estate, an individual who owns property transfers ownership of that property to another individual while retaining, for the rest of his or her life (or the life of another person), certain rights to that property.  Generally, a life estate entitles the owner of the life estate (the grantor) to possess, use, or profit from the property as long as he or she lives.  However, the grantor no longer owns the property.

 

Look-back Period - The period immediately prior to the date of application or review in which the caseworker will look to see if the applicant transferred an asset.  

 

Medical Institution - An institution certified under state law to provide medical care, including nursing and convalescent care, such as hospitals, skilled nursing facilities ( SNF ), intermediate care facilities ( ICF ), intermediate care facility for the Intellectually Developmentally Disabled (ICF/IDDIntermediate Care Facility for the Intellectually Developmentally Disabled) ; residential psychiatric treatment centers ( RPTC ); and certain assisted living homes providing residential supported living and habilitation services, including Alaska Pioneer Homes.

 

Partial Month Penalty - The penalty period for transferring an asset that produces a fractional monthly amount, resulting in a partial month of ineligibility.

 

Penalty Period - The period of time in which a client is ineligible for institutional and HCBHome and Community-Based waiver services due to a transfer of asset for less than fair market value.  See Subsection 554 L.

 

Transfer - To change ownership or title from one person(s) to another. A transfer also occurs when an individual takes any action that eliminates his ownership or reduces his control of an asset.  

 

Uncompensated Value - The difference between the equity value of the asset at the time of the transfer and any payment or compensation received. The uncompensated value is the amount upon which the length of a transfer of asset penalty is based.

 

554 B.      VERIFICATION AND DOCUMENTATION

 

A MED 3 Declaration / Denial of Asset Transfer form, or M723 Transfer of Asset Declaration notice, must be provided and completed for all nursing home or home and community based waiver applicants, including child waivers, when an applicant did not apply with a Med 4 Application for Adults and Children with Long Term Care Needs.  

 

The applicant needs to provide proof of any funds held in financial accounts. If such accounts exist, the applicant can provide the last three bank statements for each account that is owned by the applicant and his or her spouse. Client statement is acceptable for these accounts if the statements are not readily available and the caseworker does not find the information questionable. The caseworker must also obtain this declaration when an APA Adult Public Assistance/SSI Supplemental Security Income/Medicaid or MAGIModified Adjusted Gross Income Medicaid  recipient has started the waiver process.

 

In addition to the initial application, look for a transfer of asset at the time of review, when a transfer is reported, or when there is a request for a change in institutional or HCBHome and Community-Based services.
 

When there has been a transfer of assets during the look-back period, obtain the following information:
 

  1. A description of the asset transferred (the home, other real property, life estate, cash, lump sum, car, stocks, bank account, certificate of deposit, etc.).

  2. The person who transferred the asset (client, spouse, legal representative).

  3. The name of the person(s) to whom the asset was transferred.

  4. The client's relationship to the individual to whom the asset was transferred.

  5. The countable value of the asset at the time of the transfer and the compensation (money or other benefit) received or expected to be received from the transferred asset.

  6. The date the asset was transferred.

  7. Whether the applicant was the sole owner of the asset at the time of the transfer; if not, the name of any co-owners.

  8. If applicable, documentary evidence that the individual intended to dispose of an asset at a fair market value or information from knowledgeable sources to support the value (if any) at which the asset was disposed.  See Section 554-F(3).

 

Document information in the CANOCase Notes and explain the following transfer of assets rules to the client:

 

 

554 C.      TRANSFER OF ASSET RULES APPLY

 

Transfer of asset rules apply to:

 

  1. Resources - Any real or personal property, annuity, liquid resource, or funds owned by the individual and his or her spouse that is given away, sold for less than fair market value, or used to purchase a promissory note, loan, mortgage, or life estate.
      
  2. Income - Any earned or unearned income (including a lump sum) of the individual and his or her spouse that is transferred to another individual in the month of receipt.  See APA Manual Section 440-1 for the definition of income.

 

Note:

All real property in Alaska owned by an Alaska Native or American Indian is excluded from being a countable resource or as a potential transfer of asset penalty. This includes land and any structures built on the land. See MS 524-L for more information

 

 

554 D.      LOOK-BACK PERIOD

 

The date on which the look-back period is established is based on the date an individual applies for long term care services, or the date the individual is institutionalized, whichever is later.   For example, an individual entered a nursing facility in June and submitted an application during the month of July; the July application date sets the look-back period.

 

Note:

The look-back period should be measured from the date the transfer of property actually occurred, not necessarily when the transfer was officially recorded. An unrecorded conveyance is valid.

 

The look-back period is 60-months for non-trust transfers of assets for less than fair market value made on or after February 8, 2006.  

 

Take the following steps when determining the look back period:

 

  1. Evaluate all transfers beginning on or after the look-back date.

  2. Do not consider transfers made prior to this date.

  3. A transfer penalty must be determined for all non-allowable transfers within the look-back period.

  4. Document the findings in the CANOCase Notes.

 

Although eligibility is determined month-by-month, the look-back period is day specific. 

 

Example 1:  

Mrs. Novak is institutionalized on May 20, 2021.  She applies for Medicaid on May 26, 2021.  She has a 60-month look-back period from May 26, 2016 through May 26, 2021.

 

 

554 E.      PENALTY START DATE

 

For asset transfers made on or after February 8, 2006, the penalty begins the first day of the month the individual is eligible for Medicaid and would be receiving institutional level of care services, except for the imposition of a transfer of asset penalty.

 

A transfer of asset penalty cannot start in a retro month, it starts with the application date or the date the individual is institutionalized, whichever is later.

 

554 F.      ASSET TRANSFERS NOT RESULTING IN PENALTY

 

DO NOT apply a transfer of asset penalty for:

 

1. Compensated Transfer

 

Real or personal property or liquid assets that are transferred or exchanged in return for money or other tangible object, service, or benefit that is equal to or greater than the equity of the transferred asset is a compensated transfer. Transfers for services to be provided in the future are not allowable because they have not been compensated.

 

2. Excluded Asset at the Time of Transfer

 

An asset that is exempt at APAAdult Public Assistance Manual Section 433-1(B) is an allowable transfer not subject to a transfer of asset penalty.

 

3. Intent to Dispose of Assets for Fair Market Value or for Other Valuable Consideration

 

The individual intended to dispose of the assets either at fair market value or for other valuable consideration.  The individual must provide written evidence of attempts to dispose of the asset for fair market value, as well as proof to support the value at which the asset was disposed.
 

Example 2:

Ms. Raven owns rental property with a tax value of $50,000. There are no encumbrances on the property.  She lists the property with a realtor for the current market value of $50,000. After several months, Ms. Raven received a firm offer for $40,000. She accepted the offer. This example documents that Ms. Raven intended to sell her property at the current market value, but she only received a portion of that amount. Do not apply penalty to the difference between the current market value and the compensation received.

 

 

4. Transfer for Other Purposes

 

Assets transferred exclusively for a purpose other than to qualify for Medicaid or remain eligible for Medicaid at a future date.  The individual must provide convincing evidence to the specific purpose for which the asset was transferred.

 

5. Transfer Returned

 

The transferred asset for less than fair market value is returned to the client.
 

6. Transfer of the Home

 

Transfer of the home is an allowable transfer only when it is transferred to one of the following:

 

  1. Legal spouse;

  2. Child under age 21;

  3. Blind/disabled (determined by SSASocial Security Administration) child of any age;

  4. Sibling who is a co-owner of the home and has been residing in the home for a period of at least one year immediately before the applicant or recipient was institutionalized; or

  5. Adult child who resided in the home for at least two years immediately before the applicant or recipient entered an institution or began receiving home and community based waiver services, and who for the entire two-year period provided care to the disabled parent such that it prevented the need for the parent to enter the institution or to begin receiving HCBHome and Community-Based waiver services.

 

Note:

Verification must be provided that the adult child resided in the home during the two years, and that the adult child provided necessary care.  

 

7. Transfer to a Trust

 

Income transferred to a Medicaid Qualifying Income Trust, or income and resources transferred to a Special Needs or Pooled Trust established for the sole benefit of an individual under age 65 who is disabled as defined under SSISupplemental Security Income rules.

 

8. Transfers to Prevent Spousal Impoverishment

 

Transfers made under Section 553-F are not subject to penalty.

 

9. Transfers of Federal Income Tax Returns

 

Federal income tax returns are not subject to Medicaid transfer of asset penalty provisions for 12 months from the date payments are received.  However, payments given away after the end of the exempt period are subject to transfer of asset penalty provisions.

 

554 G.      TRANSFERS TO A SPOUSE, CHILD, OR A DISABLED PERSON

 

Transferring an asset to the individuals spouse, child, or to a disabled person is not subject to transfer of asset penalty if the asset was transferred:

 

  1. To the individuals spouse or to another for the sole benefit of the individuals spouse;

  2. From the individuals spouse to another for the sole benefit of the individuals spouse;

  3. To the individuals child, or to a trust established solely for the benefit of the individuals child, provided the child meets the SSISupplemental Security Income criteria for blindness or disability; or

  4. To a special needs trust established for the sole benefit of a person under age 65 who meets the SSISupplemental Security Income criteria for disability.

 

To verify that a transfer of assets is for the sole benefit of an individuals spouse, child, or a disabled person, there must be a written document that legally binds the parties to a specified course of action and identifies who can benefit from the assets.  

 

If there are restrictions placed on transfers that limit the availability of assets to the individual's spouse, child, or a disabled person, email dpapolicy@alaska.gov.  Also, please contact the Medicaid Specialist if there are any other indications that the transfer is intended to benefit someone besides the individual's spouse, child, or a disabled person.  

 

554 H.      NON-ALLOWABLE TRANSFERS

 

A non-allowable transfer occurs when any action is taken that causes income or resources of the individual or the individual's spouse to be transferred to another, including:

 

   

Example 3:

Ms. Hill added her niece's name to her $30,000 savings account in January so either party could access the account independently.  This is an "OR" account. (For Medicaid purposes, the entire $30,000 would still be considered available to her and is not subject to a transfer of asset penalty.)  However, in April, her niece withdraws the $30,000 from the joint account and puts it into her own account, which eliminates Ms. Hill's ownership, thus Ms. Hill is subject to a transfer of asset penalty beginning in May.

 

Example 4:

The same situation as above, but in January the account is changed to an "AND" account.  An "and" account requires the signature of both parties to access, thus reducing the clients control of the asset. In this situation, Ms. Hill is subject to a transfer of asset penalty beginning in February.

 

Note:

It is not a transfer of asset for less than fair market value if the reason for failure to receive an asset is because the individual cannot afford to take the necessary action to obtain the asset or the cost of obtaining the asset is equal to or greater than the assets worth.

 

 

554 I.        PROMISSORY NOTES, LOANS, OR MORTGAGES

 

A promissory note, loan, or mortgage is treated as a transfer of asset unless all of the following criteria are met:

 

  1. The repayment term is actuarially sound (i.e., the beneficiary is expected to live long enough to receive all of the payments); and

  2. Payments are made in equal amounts during the term of the loan with no deferral of payments and no balloon payments; and

  3. The promissory note, loan or mortgage prohibits the cancellation of the balance upon the death of the lender.

Note:  

Use the period life table published by the Social Security Administration online at http://www.ssa.gov/OACT/STATS/table4c6.html.

 

 

554 J.      LIFE ESTATES

 

If an individual has a life estate, the caseworker must investigate whether a transfer of asset for less than fair market value occurred.  If the value of the asset transferred by the individual is greater than the value of the life estate, a transfer of asset for less than fair market value has occurred.

 

The value of the life estate is the amount that it would sell for as of the first moment of the month.  This value is determined by multiplying the fair market value of the property by a decimal value based on the life estate holder's life expectancy.  

 

Note:

Use the life estate tables published by the Social Security Administration online at https://s044a90.ssa.gov/apps10/poms.nsf/lnx/0501140120.

  

If the value of the property exceeds the fair market value of the life estate, the difference between the property value and the life estate value is treated as an asset transfer.

 

Example 5:

Ms. Greva, age 65, owns a house worth $100,000.  She deeds the house to her son but retains a life estate in the property. Under the terms of the life estate, Ms. Greva is entitled to live in the house for the rest of her life. To determine the value of Ms. Greva's life estate, the current market value of the property ($100,000) is multiplied by a life estate factor corresponding to Ms. Greva's age in the table (.67970), resulting in a life estate worth $67,970.  The penalty is assessed for the difference between the value of the asset transferred ($100,000) and the value of the life estate ($67,790), resulting in $32,030 uncompensated transfer.

 

554 K.     ANNUITIES

 

The purchase of an annuity by an applicant or a spouse is an allowable transfer when all of the following conditions are met:

 

OR
 

 

Note:

Caseworkers must email TPL at DMATPL@Alaska.gov whenever an annuity is approved for a case and the State of Alaska is the beneficiary of that annuity.

 

To determine if a transfer for less than fair market value has occurred, take the following steps:

 

  1. Determine the number of years the beneficiary is expected to live based on the beneficiary's gender and age at the time the annuity is purchased.  

 

Note:

Use the actuarial tables published by the Social Security Administration online at www.ssa.gov/OACT/STATS/table4c6.html.

 

  1. Multiply the annual amount scheduled to be paid out by the annuity by the number of years the beneficiary is expected to live. Round to the nearest dollar. This is the amount that the annuity is expected to pay out.

  2.  Compare this amount to the purchase price of the annuity.

  3. When the amount that is expected to be paid out during the beneficiary's lifetime is equal to or greater than the purchase price of the annuity, the individual will receive fair market value for his investment. This is an allowable transfer. Do not apply a penalty.

  4. When the purchase price of the annuity is greater than the amount that is expected to be paid out in the beneficiary's lifetime, a penalty should be applied based on the total purchase price of the annuity.

  

Example 6:

Mr. Hollywood, age 65, purchases a $10,000 annuity for himself to be paid out at an annual rate of $1,000 per year over the next ten years. His life expectancy at age 65 is 15.52 years.  Since he is expected to live long enough to receive the full value of the annuity, the annuity is an allowable transfer.

 

 

Example 7:

Mr. Lena, age 85, purchases a $100,000 annuity to be paid out at an annual rate of $1,000 per year over the next ten years.  His life expectancy at age 85 is 5.89 years.  Since he is not expected to live long enough to receive the full value of the annuity, an uncompensated transfer has occurred and a penalty must be applied. The value of the uncompensated transfer is $100,000.  

 

Note:

The allowable transfer of asset policy described above does not apply to revocable and/or assignable annuities.  Instead, such annuities are considered as countable resources.

If a revocable annuity is cancelled, the funds used to purchase the annuity may be refunded to the purchaser.  If the owner or payee may be changed, it means the annuity is "assignable," which in turn means the annuity can be sold on the secondary market.  In either case, an annuity that meets one or both of these criteria is a countable resource.  If the annuity is revocable, the resource value is the amount that the purchaser would receive if the annuity is cancelled.  If the annuity is assignable, the resource value is the amount the annuity can be sold for on the secondary market.

 

554 L.      TRANSFER PENALTY AND PARTIAL MONTHS

 

Partial months of ineligibility will be imposed when the calculation of the penalty period for transferring an asset produces a remainder amount. This calculation is based on the monthly nursing home rate in the community in which the individual is institutionalized.   If unable to determine which community the individual would receive nursing facility services, use the current swing-bed rate as determined by the Division of Health Care Services, Office of Rate Review, and provided by DPADivision of Public Assistance Policy to eligibility workers upon request.  

 

 To determine the uncompensated value of a transfer:

 

  1. Determine and list the date(s) of each non-allowable transfer occurring during the look-back period.

  2. Determine the value of each transferred asset.

 

  1. Determine the Penalty Period.

 

For transfers made on or after February 8, 2006
 

  1. Add the uncompensated value of each transfer in the look-back period.

     
  2. Divide the total uncompensated value for all transfers by the average monthly cost to a private patient of nursing home care in the individual's community.  If unable to determine in which community the individual would receive nursing facility services, use the current swing-bed rate.

     
  3. When the calculation of the penalty period produces a remainder, the penalty will include a partial month disqualification.

     
  4. The result is the number of full and/or partial months for the penalty period.

     
  5. The period of ineligibility begins once an individual is institutionalized, and eligible for Medicaid.  The period runs continuously through the end of the penalty period, even if the individual subsequently stops receiving institutional level of care.

     

Example 8:

Mr. Reed entered a nursing facility in November 2021 and applied for Medicaid on December 5, 2021.

He made one transfer during the look-back period.  He transferred real property with an equity value of $150,000 on February 20, 2018, receiving no compensation.

The average monthly cost to a private patient in a nursing home in his community is $9,630.  The uncompensated transfer amount of $150,000 is divided by the average monthly rate of $9,630 and equals 15.58 months.  Because Medicaid eligibility begins on the first day of the month, the full 15-month penalty period runs from December 2019 through February 2021, with a partial month penalty calculated for March 2021:

$150,000     uncompensated transfer amount
÷    9,630     monthly rate
=   15.58     number of months for penalty period

31     number of days in March 2021
x       .58     partial month penalty period  
=  17.98     number of days for partial month penalty

The partial month penalty of 17 days (rounded down) is added to the 15-month penalty period.  This means that Medicaid will begin payment for long-term care coverage on March 18, 2021.

 

4. Multiple Penalty Periods Overlap.

 

When assets have been transferred so that multiple penalty periods overlap, combine the uncompensated value of all assets transferred and compute a single penalty period.
 

 

Example 9:  (For transfers made on or after February 8, 2006)

Mr. McFarland entered a nursing facility on July 2, 2021.  The average monthly cost to a private patient in a nursing home in his community is $9,630.  He applied for Medicaid on August 12, 2021.  The look-back period begins August 12, 2021.

He made the following transfers during the look-back period: $20,000 on January 20, 2020, another transfer of $15,000 on September 6, 2018, and another transfer of $10,000 on February 10, 2018.

The total uncompensated transfer amount of $45,000 is divided by the average monthly rate of $9,630 and equals 4.67 months.  This results in giving a partial month penalty.  Because Medicaid eligibility begins on the first day of the month, the full four-month penalty period runs from August 2021 through November 2021 with a partial month penalty calculated for December 2021:

$45,000     total multiple uncompensated transfer amount
÷  9,630     monthly rate
=    4.67     number of months for penalty period

31     number of days in December 2021
x      .67     partial month penalty period
= 20.77    number of days for partial months penalty

The partial month penalty of 20 days (rounded down) is added to the four-month penalty period.  This means that Medicaid will begin payment for long-term care coverage for Mr. McFarland on December 21, 2021.

 

  1. Both Spouses are Institutionalized or Receiving HCBHome and Community-Based Waiver Services

 

When both spouses are institutionalized or receiving HCBHome and Community-Based waiver services, divide the penalty period between the spouses. The total penalty imposed on both spouses cannot exceed the number of months of the penalty period.

 

When one spouse is no longer subject to a penalty (i.e., the spouse no longer receives institutional services or the spouse dies),

the remaining penalty period applicable to both spouses must be served by the remaining spouse.

 

If a community spouse is later institutionalized or receives waiver services and a penalty period is still in effect for the first institutionalized spouse:

 

  1. Divide the remaining penalty period equally between the spouses.

  2. Do not establish a new look-back period.  The client's initial look-back period for the first institutionalized spouse is the same for the former community spouse.

  3. Determine if any additional transfers were made by the former community spouse during the look-back period. Apply the same rules when considering an asset subject to transfer of asset penalty.

  4. A transfer that occurred during the portion of the community spouses look-back period that does not overlap with the look-back period of the first institutionalized care spouse is subject to a transfer penalty.  Only the former community spouse is subject to that penalty.

     
  5. When both spouses are approved at the same time, the extra month is applied to the one with the earlier birth date.

 

Example 10: (For transfer made on or after February 8, 2006)

Mr. Gibson enters a nursing a facility and applies for Medicaid.  Mrs. Gibson transfers an asset that results in a 12.64 month penalty against Mr. Gibson.   Four months into the penalty period, Mrs. Gibson enters a nursing facility and applies for Medicaid.  The penalty period against Mr. Gibson still has 8.64 months to run.  

Because Mrs. Gibson is now in a nursing facility and a portion of the original penalty period remains, the remaining 8.64 months of penalty is divided between Mr. and Mrs. Gibson.  Therefore, Mr. and Mrs. Gibson each have a four month penalty.   Because there is a partial month, the extra days are assigned Mr. Gibson. The partial month is given to the spouse who entered the institution or receives waiver approval first.  

 

When both spouses are approved at the same time, the partial month is applied to the one with the earlier birth date.

 

  1.  When a transfer of assets penalty is imposed, immediately notify:

 

DHCSDivision of Health Care Services Systems Unit at dhcs.systems@alaska.gov; and

The Division of Senior and Disability Services (DSDS) at longterm.careunit@alaska.gov with the date of Medicaid closure.  This is necessary so that DSDS can discontinue issuing Prior Authorizations for HCB Waiver and Nursing Home services.

The following information must be given:

 

  1. Name and identification number of the client;

  2. Date of penalty start;

  3. Date of penalty end; and

  4. Long term care or waiver services are not to be authorized or paid for until after the penalty end date.

   

The Division of Health Care Services will enter the penalty end date into the Medicaid Management Information System (MMISMedicaid Management Information System) to prevent long term care or waiver service claims from being paid until the penalty ends.

 

554 M.     UNDUE HARDSHIP

 

An undue hardship exists when a transfer of asset penalty would deprive the applicant, recipient, or community spouse of:

 

 

If a transfer of assets penalty is imposed on an individual, a timely notice of the penalty must be sent.  The notice must state that

 

 

The individual or facility acting on behalf of the individual must submit a written statement to the caseworker indicating how the individual or his or her community spouse would be subject to undue hardship and describes:

 

The request should be sent to the Medicaid Specialist at dpapolicy@alaska.gov.   The Medicaid Specialist will:

 

 

If a finding of undue hardship is made, no penalty applies.

 

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MC #57 (09/21)