C.M.R. 10, 144, ch. 332, app 144-332-H
These rules apply to trusts that are set up prior to 8/11/93.
TRUSTS
Trust funds are available assets unless the terms of the trust make them unavailable.
If the trust is irrevocable, that is, no member of the assistance unit or any responsible relative residing in the home has the power to revoke the trust arrangement or change the name of the beneficiary, what is available to the client is what is made available according to the terms of the trust.
I. The terms of the trust may specify the amount/frequency and/or purposes for which the funds may be used or this may be left to the discretion of the trustee(s). The terms of the trust may use a combination of both trustee discretion and specific fund usage.
II. Of the funds left to trustee discretion, what is available to the client is whatever the trustee makes available.
III. Funds made available are considered as income or assets in accordance with applicable Medicaid eligibility rules for the situation.
IV. If the terms of the trust restrict withdrawal by written approval of a judge of the courts, regular withdrawals will be treated as any other income. Irregular withdrawals, in order to be disregarded, must be used to supplement the needs of the person for whom the trust is drawn up.
Examples
1. An individual has a trust fund that was established upon the death of his parents based on their will. From this he is to receive $500 from the interest each month and $10,000 every three years to buy a new vehicle. The monthly payments are income. The $10,000 is used to purchase an excluded asset (the old vehicle is traded in to purchase the new one). This trust is irrevocable in accordance with the provisions above. The terms of the trust specify the amount, frequency and for part of the payments (the $10,000) the purpose. Medicaid policy treats interest payments as income and excludes the vehicle as an asset.
2. A trust was set up for the individual by his father who is deceased. The individual is to receive $200 per month for as long as the fund lasts. The fund currently has $140,000. The individual can get all the funds in the trust if there is an emergency. The $200 per month is considered income as long as this represents interest income. The remainder of the fund is considered an asset (currently $140,000) since it can be accessed by the individual.
3. A trust is set up for the individual by her grandmother. It is irrevocable and the trustee has full discretion in disbursement of the funds (totaling $75,000) based on the needs of the individual. Since the trust is irrevocable, what is considered available to the individual is whatever the trustee, in her discretion, makes available.
Medicaid Qualifying Trusts
Even if a trust is irrevocable, it may be considered as an available asset if it meets certain conditions listed below. These are called Medicaid Qualifying Trusts. This is a type of trust or other legal device which:
I. is established by the individual or individual's spouse (other than by will). It may be irrevocable or established for purposes other than to enable the grantor to qualify for Medicaid;
II. the individual is the beneficiary of all or part of the payments from the trust;
III. the distribution of such payments is determined by one or more trustees who are permitted to exercise discretion with respect to the distribution to the applicant; or
IV. when established by the individual's or spouse's legal guardian or power of attorney, the trust is considered to have been established by the individual or spouse whom they represent.
The amount of this trust that is counted as an asset is the total undistributed amount that is permitted under the terms of the trust that the trustee could disburse if he, as trustee, exercised his full discretion.
Because Medicaid is the payer of last resort, it is expected that individuals (and their spouses) access available trust income and assets before turning to Medicaid. The assets and income from trusts that contain provisions that purport to limit the trustee's discretion to disburse funds in situations related to the individual's application for Medicaid are to be considered without regard to such provisions. For example, the assets and income of a trust are to be considered without regard to any provisions that purport to limit the trustee's discretion to disburse funds when the individual applies for Medicaid or enters a nursing home.
Example
Mary establishes a trust under which she is a beneficiary. The trustee has discretion to distribute all of the assets of the trust to Mary except if she applies for Medicaid or enters a nursing home. In those circumstances, the trust states that the trustee does not have discretion to disburse the funds to Mary. At the time Mary applies for Medicaid, the trust is valued at $200,000. All of the $200,000 is considered available to Mary.
Amounts actually distributed are counted as income and/or assets using applicable eligibility rules for the situation.
When determining eligibility for Nursing care assistance, the value of an irrevocable trust may constitute an uncompensated transfer of assets. See Part 15.
If the Department determines that denial of eligibility would constitute undue hardship, these provisions may be waived. The consequence of being denied Medicaid coverage by itself does not constitute undue hardship.
Exceptions
1. When the beneficiary of a trust is a mentally retarded individual who resides in an Intermediate Care Facility MR the trust is not considered a Medicaid qualifying trust provided the trust or initial decree was established prior to 4/7/86 and is solely for the benefit of the mentally retarded individual.
2. Trusts that are set up with retroactive SSI benefits awarded under the Zebleyvs. Sullivan decision are exempted from the provisions of the Medicaid Qualifying Trust and transfer of assets rules.
Examples
1. The individual's wife set up a trust fund for him before she died. The trust is irrevocable. The individual receives monthly payments of $100.00 from interest accrued on the principal and the trustee may disburse the remaining funds (currently $150,000) to meet living expenses. This is a Medicaid Qualifying Trust because it was set up by the individual's wife (not by will). Therefore, the total amount of the trust ($150,000) is a countable asset. This is the total undistributed amount of the trust that the trustee could disburse if she exercised her full discretion.
2. Same as Example 1 except: Added to the monthly interest income of $100.00, the remaining funds are disbursed in $3,000 semi-annual payments for the life of the individual. Any funds remaining at his death are passed to the individual's daughter. The trustee has no discretion in the disbursement of funds. Here, both the $100.00 per month and the $3,000 semi-annual payment are income. Since the trustee has no discretion in disbursement of funds, nothing else is countable.
3. The individual sets up a trust fund for himself that is irrevocable. He receives $500.00 per month from interest. The principal will be donated to the Save the Whale Foundation at his death. The trustee has no discretion in disbursement of funds. This is not a Medicaid Qualifying Trust even though it was set up by the individual other than by will for his benefit because the trustee has no discretion in distribution of the trust funds. The disbursement of $500.00 per month are counted as income under the general rules applying to trusts.
Couples Residing in a Nursing Facility
If the total assets of a couple in the same room in a nursing facility exceed the standard for a couple, one of the individuals may reapply for assistance. This results in one being an ineligible spouse. Beginning the first of the month after being denied, only the assets remaining in the name of the eligible spouse are considered when determining eligibility.
If the couple resides in different rooms in the same facility or in different facilities, then each is treated as an individual when determining the asset limit. Since there is no penalty for transfer of assets between spouses, they can decide who will retain the assets.
No spousal allowance of income or assets is determined since the ineligible spouse is not living in the community.
Transfer of Assets
"Assets" are defined as cash or other liquid assets or real or personal property.
When determining eligibility for BME, BMR and ALPHA Waivers and nursing care services, the following applies to transfers to individuals by the applicant or the applicant's spouse. Transfers between spouses do not incur a penalty. Although an individual or couple may be eligible in the community, once a request is made for waiver or nursing care services all assets must be checked back thirty months from date of application to determine if a transfer has occurred.
Transfers only affect nursing and waiver services, all other Medicaid services may still be covered.
To determine the effect that the transfer has on eligibility several questions must be answered: I. What was transferred?
I. Who was the transfer made to?
II. When was the transfer made?
III. What did the individual or couple receive in exchange?
IV. Why was the transfer made?
Exempt Transfers
The following may be transferred without penalty:
I. The home if it is transferred to
A. a child who is under age 21 or who does or would meet SSI criteria of total and permanent disability or blindness.
B. a sibling who has an equity interest in the home and was residing in the home for at least one year prior to the individual going to the medical institution.
Example
A brother and sister have joint ownership of a home in which they both lived for the last five years prior to the brother going into a nursing facility. The brother may transfer his interest in the home to his sister without penalty.
A penalty would be established if:
1. the sister was not a joint owner or had no equity interest in the home, or
2. the sister had not lived in the home one year prior to the institutionalization of her brother.
C. a child over age 21 who does not meet the SSI criteria of blindness or disability if the child was residing in the home for at least two years prior to the individual's entering the medical institution and was providing care which enabled the institutionalized individual to live at home rather than a medical institution for this time.
D. a spouse.
II. Any asset transferred to the individual's child who does or would meet SSI criteria of total and permanent disability or blindness.
III. Assets which the owner intended to dispose of at fair market value or for other valuable consideration but, without being at fault, the owner did not obtain full fair market value.
IV. Assets, exempt or non-exempt, transferred to (or for the sole benefit of) the community spouse.
V. Assets transferred thirty months prior to the date of application.
VI. Assets transferred for Fair Market value:
Fair Market Value
A transfer for fair market value incurs no penalty. Fair market value may be received in cash. It may also be in the form of past support for basic necessities or past medical expenses and debts, if measurable and verifiable. A reasonable value must be placed on the support provided or medical costs and the specific time period for which it is given substantiated. Past support for basic necessities does not include such items as gifts, clothing, transportation or personal care provided by relatives unless these were provided as part of a legally enforceable agreement whereby the individual would transfer the asset or otherwise pay for such items.
Examples of transfer for fair market value
1. An individual transfers ownership of a life insurance policy to a funeral home.
2. An individual's sister pays all household expenses while he waits for an insurance settlement of $5000. He verifies that his rent, utilities and food came to $4500. He may transfer the $4500 to his sister without penalty because these are basic necessities which are measurable and verifiable.
Examples of transfers for less than fair market value
1. A couple sells their home to their son for $40,000. The assessed value is $70,000. A $30,000 transfer has occurred.
2. An individual has help from her daughter with shopping, cleaning and preparing meals. The daughter spends four to eight hours a week providing these services. When the individual enters a nursing facility she transfers $25,000 to her daughter to compensate for these services. Since these were not provided as part of a legally enforceable agreement to pay for these services, the transfer does result in a penalty.
3. A neighbor comes in for an hour a day to help a couple prepare meals and do laundry. Two years later the couple give the neighbor $50,000. Two months later they enter a nursing facility. Based on the average cost for homemaker services in the area a value of $10.00 per hour is placed on these services and $7280 of the transfer is allowed. The remaining $42,720 would be a transfer for less than fair market value.
Disproving the Presumed Transfer
Any transfer taking place will be presumed to have been made for the purpose of becoming or remaining eligible for Medicaid, unless the individual furnishes clear and convincing evidence that the transaction was for some other purpose and that there was no intent at the time to apply for Medicaid within the foreseeable future. It is the Department's responsibility to demonstrate that a transfer took place and to establish the date of the transfer. It is the individual's responsibility to prove that the transfer took place for reasons other than to gain eligibility for Medicaid.
If the individual wants to disprove the presumption that the transfer was made to establish Medicaid eligibility, the burden of proof rests with the individual. The individual must demonstrate that the transfer was specifically and solely for some other purpose than to receive Medicaid. Statements and evidence to disprove the transfer must be contained in the individual's record.
The statement should cover, but not necessarily be limited to the individual's:
I. purpose for transferring the asset;
II. attempts to dispose of the asset for fair market value;
III. reasons for accepting less than the fair market value for the asset;
IV. plans for and ability to provide financial support after the transfer;
V. relationship, if any, to the persons to whom the asset was transferred; and
VI. belief that the fair market value was received.
In addition to the individual having to prove that the transfer was made specifically and solely for a purpose other than to be Medicaid eligible, other factors to be considered include:
I. a sudden onset of a disability or blindness after the asset was transferred;
II. the diagnosis of a previously undetected disabling condition after the transfer occurred;
III. unexpected loss of other assets following the transfer;
IV. unexpected loss of income after the transfer occurs; and
V. court ordered transfers.
Establishing Date and Value of a Transfer
I. Assets other than bank accounts. A transfer of assets occurs on the date when:
A. title (ownership) or legal interest to property has passed from the individual or spouse to another individual;
B. title to property has been given by establishing joint ownership, such as adding a name to stocks, bonds, real property;
The value of the transfer is the value of the asset or the part of the asset that is transferred. For example:
1. Sole ownership of a home valued at $100,000 is transferred to another. The value of the transfer is $100,000.
2. Sole ownership of a home valued at $100,000 becomes jointly owned with another person. The value of the transfer is $50,000.
C. a document has been signed and delivered by the individual or spouse to another individual to transfer title at some future date. This concept does not include a will but does include a signed but unregistered deed;
D. the asset is converted from an accessible to an inaccessible asset. An example is when assets are placed in an irrevocable trust or a name is removed from a jointly owned asset; or
E. the individual or spouse refuses to accept items which would be countable assets.
II. With bank accounts, a transfer of funds in an account is determined to take place when:
A. funds, owned by the individual, are withdrawn by the other joint owner(s) from an account and used for other that the sole benefit of the individual; or
B. another person's name is added to the individual's account, the money in the account is owned by the individual, and the intent of the individual in giving access is to convey ownership of those funds.
1. If the individual maintains that there was an intent to transfer funds in the bank account at the time a joint name was added, this intent must be documented.
2. Documentation consists of a clearly written statement of intent to transfer the funds in the account to the joint owner. This statement must be:
a. a notarized statement; or
b. signed by the individual at the time the account was made joint or within a reasonable period of time, usually one week but maybe longer due to circumstances beyond the control of the client.
Note: Evidence of an intent to transfer the funds in the account at the time that the name was added to the account will be rebutted by evidence that the individual continued to use the funds.
Examples
George adds his son Larry's name to a $50,000 bank account in 8/91. In 6/92 Larry withdraws $50,000 which he used to make renovations on his (Larry's) home. George is applying for nursing care services 9/92 Whose money is the $50,000? The money in the account is made up of deposits by George. This is George's money and there is a potential transfer. What was George's intent of adding son's name? If the intent was to convey ownership of the funds in the account, this must be documented with a notarized statement by George. In this situation, there is no statement from George. No transfer occurred when Larry's name was added as a joint owner. The 6/92 withdrawal is then examined as a transfer. Since Larry used the $50,000 that was withdrawn for other than the sole benefit of George, a transfer has occurred. Unless the transfer is exempted (4120.01), the penalty is assessed for $50,000 as of 6/92. Sally adds her son's name (Sam) to her bank account in 12/88. At that time there was $70,000 in her account. At the time of adding her son's name to the account she signs a statement that she intends to transfer the funds in the account. Subsequently, Sally cashes a check for $10,000 from the account. Also during the transfer penalty period, Sam cashes a check for $20,000 from the joint account. At the time Sally applies for nursing care services in 9/92, there is $40,000 in the account. The $20,000 spent by Sam was a transfer subject to penalty. This is because Sally's continued use of the funds in the account rebuts her written statement saying she intended to transfer the funds to her son at the earlier time. Since the funds were Sally's when Sam cashed the check for $20,000, this is a transfer subject to penalty. The $40,000 remaining in the account is considered an available asset for Sally. Butch adds his nephew's name (Charles), to his (Butch's) solely owned bank account in 1/89. The $70,000 in the account was owned by Butch. There is documentation that Butch intended to transfer the funds in the account at that time. In 5/92, Butch sells a piece of his solely owned property for $20,000 and deposits this money in the joint account. Charles cashes a $20,000 check from the account in 6/92. The account totals $70,000 at the time Butch applies for nursing care services in 9/92. The $20,000 withdrawn by Charles in 6/92 is considered to be part of the $70,000 that Butch intended to give his nephew in 1/89. Therefore, this $20,000 may not be subject to transfer penalty. Of the remaining $70,000 in the account: $20,000 is a countable asset for Butch since this $20,000 was deposited by him from his funds. $50,000 is owned by Charles due to the 1/89 transfer of funds.Establishing a Penalty
A period of ineligibility is imposed on the individual in a nursing care status if the individual or spouse disposes of an asset for less than Fair Market Value.
When a penalty is imposed, it is only the nursing care services that cannot be paid. The individual may be eligible for all other Medicaid services.
Once it has been determined that a transfer of assets has occurred for less than fair market value, the penalty period must be determined.
A special determination must be made for each transfer.
I. Determine the date that each transfer occurred.
II. Determine the amount of the transfer.
III. Divide the amount of the initial transfer by the current average monthly private rate at the time of application for a semiprivate room rate for a nursing facility (see Chart 4.3).
This determines the number of months of ineligibility based on the initial transfer. Any remaining fraction is to be disregarded. The penalty period may not exceed thirty months. The penalty period begins with the month in which the uncompensated transfer occurred. If there had been more than one transfer and a penalty is already in effect for that month, the penalty period will begin with the next non-penalty month.
Examples
1. An individual adds her daughter's name to her savings account on 4/14. A transfer for the entire balance has taken place. Based on the amount of funds in the account at the time of transfer she is ineligible for 7.3 months. Eligibility potentially begins 11/1.
2. An individual has a solely owned savings account with $60,000 in it. In 10/92 he transfers $60,000 to his daughter. He also owns stocks worth $40,000 which he transfers to his son in 12/92.
10/92 $60,000 ÷ $3619 = 16.5 months, potentially eligible 2/94
12/92 $40,000 ÷ $3619 = 11 months, potentially eligible 1/95
The penalty on the 12/92 transfer does not start until 2/94. This is the first non-penalty month after the 12/92 transfer
In this case the individual is potentially eligible as of 1/95.
C.M.R. 10, 144, ch. 332, app 144-332-H