25.03 Allowable transfers

Transfers for fair-market value – in general. No penalty period is applied to income or resources transferred for fair market value. AHS determines whether the individual requesting Medicaid coverage of long-term care services and supports, or the spouse of such individual, as the case may be, received fair market value for a transfer of income or resources by determining the difference, if any, between the fair market value of the income or resource reduced by any applicable deductions at the time of the transfer and the amount received for the income or resource. Any of the following deductions may be used to reduce fair market value: The amount of any legally enforceable liens or debts against the transferred income or resource at the time of transfer that reduced the transferor’s equity in the income or resource; The reasonable and necessary costs of making the sale or transfer; The value of income or resources received by the transferor in exchange for the transferred income or resources; The value of income or resources returned to the transferor; and The following verified payments or in-kind support given to or on behalf of the transferor as compensation for receipt of the income or resources by the person who received the income or resources: (i) Personal services; (ii) Payments for medical care; (iii) Funeral expenses of the individual’s deceased spouse; (iv) Taxes, mortgage payments, property insurance, or normal repairs, maintenance and upkeep on the transferred property; or (v) Support and maintenance (e.g., food, clothing, incidentals, fuel and utilities) provided in the transferor’s own home or in the home of the person who received the income or resources from the transferor. Receipt of fair market value after the date of the transfer. If the value of a transferred resource is scheduled for receipt after the date of transfer, it is considered a transfer for fair market value only if the transferor can expect to receive the full fair-market value of the resource within their expected lifetime. Expected lifetime is determined as follows: When institutionalized individual is transferor. Expected lifetime of the institutionalized individual is measured at the time of the transfer as determined in accordance with actuarial publications of the Office of the Chief Actuary of the SSA (http://socialsecurity.gov/OACT/STATS/table4c6.html). When spouse of institutionalized individual is transferor. Expected lifetime of the spouse of the institutionalized individual is measured at the time of the transfer as determined in accordance with Special Rules for Medicaid Coverage of Long-Term Care Services and Supports – Eligibility and Post Eligibility Part 4 – Page 12 (Sec.25.00, Sub.25.03) actuarial publications of the Office of the Chief Actuary of the SSA) (http://socialsecurity.gov/OACT/STATS/table4c6.html). Pursuant to the authority granted in Vermont Act 71 § 303(7)(2005), AHS may develop alternate actuarial tables that will be consistent with federal law and adopted by rule. Transfers for less than fair-market value – in general. A penalty period is not imposed for a transfer for less than fair market value that meets one or more of the following criteria: Time of transfer – beyond look-back period. The date of the transfer was more than 60 calendar months prior to the first month in which the individual both requests eligibility for Medicaid coverage of long-term care services and supports and meets all other requirements for eligibility. Transferred income or resources are returned. The transferred income or resources have been returned or otherwise remain available to the individual or the individual’s spouse. Property transferred of a person other than the individual or their spouse. The action that constituted the transfer was the removal of the individual’s (or spouse’s) name from a joint account in a financial institution, and the individual (or spouse) has demonstrated, to AHS’s satisfaction, that the funds in the account accumulated from the income and resources of another owner who is not the individual (or their spouse). Transfer of resource for a purpose other than creation or maintenance of eligibility for Medicaid coverage of long-term care services and supports. The transferor has documented to AHS’s satisfaction convincing evidence that the resources were transferred exclusively for a purpose other than for the individual to become or remain eligible for Medicaid coverage of long-term care services and supports. A signed statement by the transferor is not, by itself, convincing evidence. Examples of convincing evidence are documents showing that: (i) The transfer was not within the transferor’s control (e.g., was ordered by a court); (ii) The transferor could not have anticipated the individual’s eligibility for Medicaid coverage of long- term care services and supports on the date of the transfer (e.g., the individual became disabled due to a traumatic accident after the date of transfer); or (iii) A diagnosis of a previously undetected disabling condition leading to the individual’s eligibility for Medicaid coverage of long-term care services and supports was made after the date of the transfer. Transfers of specified property for the benefit of certain family members. The transfer meets the criteria specified below for transfers involving trusts (see paragraph (d)), transfers of homes (see paragraph (e)), and transfers for the benefit of certain family members (see paragraph (g)). Intent to transfer for fair market value. The transferor has demonstrated to AHS’s satisfaction that they intended to dispose of the income or resources either at fair market value, or for other valuable consideration. Transfer of excluded income or resources Special Rules for Medicaid Coverage of Long-Term Care Services and Supports – Eligibility and Post Eligibility Part 4 – Page 13 (Sec.25.00, Sub.25.03) (i) The transferor transferred excluded income or resources. (ii) Penalties are imposed for the transfer for less than fair market value of any asset considered by the SSA’s SSI program to be countable or excluded. For example, transfer of a home or of the proceeds of a loan are both subject to penalty. Allowable transfers involving trusts. A penalty period is not imposed for transfers involving trusts that meet one or more of the following criteria: The action that constituted the transfer was the establishment of an irrevocable trust that does not under any circumstances allow disbursements to or for the benefit of the individual, and the date of the transfer was more than 60 calendar months prior to the first month in which the individual requests Medicaid coverage of long-term care services and supports. The action that constituted the transfer was the establishment of a trust solely for the benefit of the individual if the individual was under age 65 when the trust was established and the trust meets all of the criteria at § 29.08(e)(1)(ii)(F). The action that constituted the transfer was the establishment of a pooled trust, as specified at § 29.08(e)(1)(ii)(G), unless the individual was age 65 or older when they established the trust. If so, the transfer is not exempted from the imposition of a transfer penalty period. The action that constituted the transfer was the establishment of a revocable trust. However, AHS considers any payment from the revocable trust to anyone other than the individual a transfer for less than fair-market value subject to penalty unless the payment is for their benefit. Allowable transfers of homes to family members. A penalty period is not imposed for the transfer of a home that meets the definition at § 29.08(a)(1) provided that title was transferred to one or more of the following persons: The spouse of the individual requesting Medicaid coverage of long-term care services and supports; The individual’s child who was under age 21 on the date of the transfer; The individual’s son or daughter who is blind or permanently and totally disabled, regardless of age; The brother or sister of the individual when: (i) The brother or sister had an equity interest in the home on the date of the transfer; and (ii) Was residing in the home continuously for at least one year immediately prior to the date the individual began to receive Medicaid coverage of long-term care services and supports, including services in a home and community-based setting; or The son or daughter of the individual provided that the son or daughter: (i) Was residing in the home continuously for at least two years immediately prior to the date the individual (parent) began receiving Medicaid coverage of long-term care services and supports, including services in a home and community-based setting; and Special Rules for Medicaid Coverage of Long-Term Care Services and Supports – Eligibility and Post Eligibility Part 4 – Page 14 (Sec.25.00, Sub.25.03) (ii) Provided care to the individual during part or all of this period that allowed the individual to postpone receipt of Medicaid coverage of long-term care services and supports. Allowable transfers involving life-estate interests in another individual’s home. A penalty period is not imposed for the purchase of a life-estate interest in another person’s home when: It is the purchaser’s residence; and The purchaser resides in the home for a period of at least one year after the purchase. Other allowable transfers. A penalty period is not imposed for transfers that meet any of the following criteria: The transfer was for the sole benefit of the individual requesting Medicaid coverage of long-term care services and supports. The income or resource was transferred by the institutionalized spouse to their community spouse before the initial determination of the institutionalized spouse’s eligibility for Medicaid coverage of long-term care services and supports. This also applies to a transfer made to a third party for the sole benefit of the community spouse. The income or resource was transferred to the individual’s son or daughter who is blind or permanently and totally disabled or to a trust for the sole benefit of such son or daughter regardless of their age. The income or resource was transferred to a trust, including a trust described in § 29.08(e)(1)(F) or § 29.08(e)(1)(G), established solely for the benefit of an individual under the age of 65 years who is disabled. Transfers involving annuities In general (i) Purchases. Any annuity purchased by an individual requesting Medicaid coverage of long-term care services and supports, or, if married, their community spouse on or after February 8, 2006, must name Vermont Medicaid as the first remainder beneficiary of the annuity up to the amount of Medicaid payments, including payments for Medicaid coverage of long-term-care services and supports, made by the state on behalf of the individual. If there is a community spouse or a minor or disabled child, they may be named as a remainder beneficiary ahead of the state. Vermont Medicaid must then be named as the secondary remainder beneficiary. If Vermont Medicaid is not named as a remainder beneficiary in the correct position, the purchase of the annuity is considered a transfer for less than fair market value. When Vermont Medicaid is a remainder beneficiary of an annuity, the issuer of the annuity is required to notify Vermont Medicaid of any changes in the disbursement of income or principal from the annuity as well as any changes to the state’s position as remainder beneficiary. (ii) Annuity-related transactions other than purchases. In addition to the purchase of an annuity, certain transactions with respect to an annuity that occur on or after February 8, 2006, make an annuity, including one purchased before that date, subject to the provisions of this paragraph. Such Special Rules for Medicaid Coverage of Long-Term Care Services and Supports – Eligibility and Post Eligibility Part 4 – Page 15 (Sec.25.00, Sub.25.03) transactions include any action taken by the individual requesting Medicaid coverage of long-term care services and supports or, if married, their community spouse that changes the course of payments to be made by the annuity or the treatment of the income or principal of the annuity. Routine changes and automatic events that do not require any action or decision are not considered transactions that would subject the annuity to this treatment. Additional requirements (i) In addition to the requirement under paragraph (h)(1) that Vermont Medicaid be named as a remainder beneficiary in the correct position in order for the purchase of an annuity by an individual requesting Medicaid coverage of long-term care services and supports or, if married, their community spouse to not be considered a transfer for less than fair market value, if the purchase of the annuity is by the individual requesting Medicaid coverage of long-term care services and supports, the purchase must also meet one or more of the four alternatives described below in order for it to not be subject to a transfer penalty. To determine that an annuity is established under any of the various provisions of the Code that are referenced in (C) and (D) below, AHS relies on verification from the financial institution, employer or employer association that issued the annuity. The burden of proof is on the individual to produce this documentation. Absent such documentation, AHS considers the purchase of the annuity a transfer for less than fair-market value and, as such, subject to a penalty. (ii) The four alternatives are as follows: The annuity meets the provisions of §§ 29.08(d)(1) or 29.09(d)(1). The annuity is: (I) Irrevocable and nonassignable; (II) Provides for payments to the individual in equal intervals and equal amounts with no deferral and no balloon payments made; (III) Is actuarially sound because it does not exceed the life expectancy of the individual, as determined using the actuarial publications of the Office of the Chief Actuary of the SSA (http://socialsecurity.gov/OACT/STATS/table4c6.html); and (IV) Returns to the individual at least the amount used to establish the contract and any additional payments plus earnings, as specified in the contract. The annuity is considered either: (I) An individual retirement annuity (according to § 408(b) of the Code), or (II) A deemed Individual Retirement Account (IRA) under a qualified employer plan (according to § 408(q) of the Code). The annuity is purchased with proceeds from one of the following: (I) A traditional IRA (§ 408(a) of the Code); Special Rules for Medicaid Coverage of Long-Term Care Services and Supports – Eligibility and Post Eligibility Part 4 – Page 16 (Sec.25.00, Sub.25.03) (II) Certain accounts or trusts which are treated as traditional IRAs (§ 408(c) of the Code); (III) A simplified retirement account (§ 408 (p) of the Code); (IV) A simplified employee pension (§ 408 (k) of the Code); or (V) A Roth IRA (§ 408A of the Code). Impermissible transfers. An annuity that does not meet the above criteria is assessed a transfer penalty based on its fair market value. The fair market value of an annuity equals the amount of money used to establish the annuity and any additional amounts used to fund the annuity, plus any earnings and minus any early withdrawals and surrender fees. Allowable transfers involving promissory notes and other income-producing resources Promissory notes or similar income-producing resources (contracts) are assessed a transfer penalty based on their fair market value unless they: (i) Have a repayment term that is actuarially-sound as determined in accordance with actuarial publications of the Office of the Chief Actuary of the SSA (http://socialsecurity.gov/OACT/STATS/table4c6.html); (ii) Provide for payments to be made in equal amounts during the term of the loan, with no deferral and no balloon payments made; and (iii) Prohibit the cancellation of the balance upon the death of the lender. Fair market value equals the amount of money used to establish the contract and any additional payments used to fund it, plus any earnings and minus any payments already received as of the date of the application for Medicaid coverage of long-term care services and supports. Transfers involving jointly-owned income or resources Joint-ownership established on or after January 1, 1994. For any joint-ownership established on or after January 1, 1994, the portion of the jointly-owned asset subject to the imposition of a penalty period is evaluated based on the specific circumstances of the situation. An individual is presumed to own a jointly- owned resource using the rules in § 29.09. In the case of a jointly-owned account in a financial institution, for example, since the account is presumed to be owned entirely by the individual (see § 29.09(c)(5)(ii)), a transfer penalty is imposed against the individual for any amount withdrawn from the account by another joint owner on the account. The individual may rebut the presumption of ownership by establishing to AHS’s satisfaction that the amount withdrawn was, in fact, the sole property of and contributed to the account by the other joint owner (or owners), and thus did not belong to the individual. Joint-ownership established before January 1, 1994. For a joint ownership established before January 1, 1994, the date of the transfer is the date the other person (or persons) became a joint owner. The value of the transfer equals the amount that the resource available to the individual or, if married, the individual’s spouse was reduced in value when the other person (or persons) became a joint owner. Special Rules for Medicaid Coverage of Long-Term Care Services and Supports – Eligibility and Post Eligibility Part 4 – Page 17 (Sec.25.00, Sub.25.04)