29.07 Resources

In general Resources are cash and other property, real or personal, that an individual (or their spouse, if any): (i) Owns; (ii) Has the right, authority or power to convert to cash (if not already cash); and (iii) Is available for their support and maintenance. Resources are treated in different ways depending on the rules of the coverage group involved and the type and liquidity of the resource. Resources are counted based upon their availability and the ease with which they can be converted into cash. Availability is often affected when more than one person has an ownership interest in the same resource. Resource limits vary depending on the type of category and services, and the size of the Medicaid group. Resource eligibility for each coverage group is determined by comparing the resources of the financial responsibility group to the resource limit based on the size of the Medicaid group.19 19 For the current resource maximums, see Vermont’s Eligibility Standards for Healthcare Programs on the Department of Vermont Health Access website. Financial Methodologies Part 5 – Page 15 (Sec.29.00, Sub.29.07) All resources of the members of the financial responsibility group must be counted except those specifically excluded. See § 29.08 for the resource exclusion rules. Equity value as well as availability is considered when determining the amount of a resource that counts. See § 29.09 for the general rules on valuing countable resources. Types of resources. This paragraph describes some of the kinds of resources the availability of which are considered in determining MABD eligibility. The descriptions are divided into two categories – nonliquid resources and liquid resources. Except for cash, any kind of property may be either liquid or nonliquid. The liquidity (or nonliquidity) of a resource has no effect on the resource’s countability for MABD eligibility purposes. Definition: Nonliquid resources. A nonliquid resource means property that is not cash, including real and personal property that cannot be converted to cash within 20 work days. Real property, life estates, life insurance and burial funds, described below, are some of the more common kinds of nonliquid resources. Certain other noncash resources, though they may occasionally be liquid, are nearly always nonliquid. These include, but are not limited to, household goods and personal effects, vehicles, livestock, and machinery. (i) Real property. Land and generally whatever is erected, growing on, or affixed to land. See § 29.08(a) for information on the resource exclusion of real property. (ii) Life estates. Life estate means a legal arrangement entitling the owner of the life estate (sometimes referred to as the “life tenant”) to possess, rent, and otherwise profit from real or personal property during their lifetime. The owner of a life estate sometimes may have the right to sell the life estate, but does not normally have future rights to the property. Ownership of a life estate may be conditioned upon other circumstances, such as a new spouse. The document granting the life estate includes the conditions for the life estate and the right of the owner of the life estate to sell or bequeath it, if these property rights were retained. See § 29.08(a)(6) for information on the resource exclusion of life estates. (iii) Life insurance. A contract that provides for its purchaser to pay premiums to the insurer, who agrees to pay a specific sum to a designated beneficiary upon the death of the insured. Life insurance is usually sold by an insurance company but may also be sold by other financial institutions, such as brokerage firms. See § 29.08(b) for information on the resource exclusion of life insurance. The following are terms related to life insurance: Face value. The amount the life insurance policy pays the designated beneficiary upon the death of the insured. Term life insurance. A life insurance policy that does not accumulate any cash value as premiums are paid. Whole life insurance (sometimes called ordinary life, limited payment or endowment insurance). A life insurance policy that accumulates cash value as premiums are paid. It may also pay periodic dividends on this value when all premiums have been paid. These dividends may be paid to the owner, or they may be added to the cash surrender value (defined below) of the policy. Financial Methodologies Part 5 – Page 16 (Sec.29.00, Sub.29.07) Cash surrender value (CSV) of whole life insurance. The amount the owner would receive if the life insurance policy were terminated before the insured dies. It is a form of equity that accumulates over time as life insurance premiums are paid. The owner may borrow against the CSV according to the terms of the policy. A loan against a policy reduces its CSV. Group policy. A life insurance policy that is usually issued through a company or organization insuring the participating employees or members and, perhaps, their families. The group policy may be paid partially by the employer. A group insurance policy generally has no CSV. (iv) Burial Funds Any separately-identifiable fund clearly designated for burial expenses (which includes expenses for burial spaces, items related to burial spaces and services related to burial spaces) through the title to the fund or by a sworn statement provided. Burial funds include contracts, trusts, or other agreements, accounts, or instruments with a cash value. Some burial funds include accumulated interest, and the value of some burial funds may change through time (e.g., when the fund consists of bonds). See § 29.08(c) for information on the resource exclusion of burial funds. The cash value of life insurance policies may also be treated as a burial fund if owned by a person whose income and resources are considered in determining an individual’s MABD eligibility and if designated as specified above. For the purposes of determining MABD eligibility, burial spaces, if not fully paid, are considered burial funds and include burial plots, gravesites, crypts, mausoleums, caskets, urns, and other repositories customarily and traditionally used for the deceased’s bodily remains. Items related to burial spaces include, but are not limited to, vaults, headstones, markers, plaques, and burial containers for caskets. Services related to burial include, but are not limited to, embalming, opening and closing of the gravesite, and care and maintenance of the gravesite, sometimes called an endowment or perpetual care. Definition: Liquid resources. A liquid resource means cash or other property that can be converted to cash within 20 work days. Accounts in financial institutions; retirement funds; stocks, bonds, mutual funds, and money market funds; annuities; mortgages and promissory notes; and home equity conversion plans, described below, are some of the more common kinds of liquid resources. (i) Accounts in financial institutions Accounts in depository financial institutions such as banks and credit unions include, but are not limited to, savings accounts, checking accounts, joint fiduciary accounts, and certificates of deposit. Depository institutions may also manage mutual fund and money market fund accounts for depositors. Nondepository financial institutions, such as brokerage firms, investment firms, and finance companies, also offer certificates of deposits as well as accounts and services related to the purchase and sale of stocks, bonds, mutual funds, money market funds, and other investments. (ii) Stocks, bonds, and funds Legal instruments authenticating an investment, such as stocks, bonds, mutual funds, and money market funds pay interest at specified intervals, sometimes pay dividends, and are convertible into cash either on demand or at maturity. U. S. savings bonds are obligations of the federal government. Unlike other government bonds, Financial Methodologies Part 5 – Page 17 (Sec.29.00, Sub.29.07) they are not tradable in the usual sense through brokers and security traders and, as described below, the value of the bond depends on its type. See § 29.08(i)(11) for information on the resource exclusion of U.S. savings bonds. (I) Series E and EE bonds are sold at one half of their face value and increase in redemption value as interest accrues. (II) Series I bonds are sold at their full face value and increase in redemption value as interest accrues. (III) Series H and HH bonds are sold at their full face value and do not increase in value. Instead, they pay interest to the owner each six months. (iii) Annuities. A contract reflecting payment to an insurance company, bank, charitable organization, or other registered or licensed entity; it may also be a private contract between two parties. There are two phases to an annuity: An accumulation phase and a pay-out phase, and their countability as a resource for MABD eligibility purposes is impacted by the phase the annuity is in (see below). Annuities vary in how they accumulate and pay out money. Annuities may accumulate money by payment of a single lump sum or by payments on a schedule, which accumulate interest over time. Once an annuity has reached its pay-out phase (often referred to as “matured”), money is paid to the beneficiary according to the terms of the annuity contract. Parties to an annuity (I) There are always two parties to an annuity: The writer of the annuity, usually an insurance carrier or charitable organization, and the purchaser who owns the annuity (sometimes referred to as the annuitant). There may also be a third party to the annuity if someone other than the owner is the annuitant. (II) In addition, annuities also name a beneficiary. The beneficiary is the person who will be paid a regular stream of income from the annuity in equal payments. Anyone can be a beneficiary, including but not limited to, the owner of the annuity, a spouse, dependent, trust, estate, commercial entity, proprietorship, or charitable organization. (III) Beneficiaries may be revocable or irrevocable. A revocable beneficiary can be changed by the owner of the annuity at any time. An irrevocable beneficiary can be changed only by the written permission of that beneficiary. (IV) In addition to the beneficiary described in (II) above, annuities can also provide for a contingent beneficiary or residual beneficiary. A contingent or residual beneficiary will receive annuity payments upon the occurrence of a specified condition. Types of annuities. There are many types of annuities. For MABD purposes, AHS considers whether annuities of any type are available as a liquid resource. Since annuities are trust-like instruments, terminology similar to trusts is used when it describes the availability of cash from annuities. (I) Annuity naming revocable beneficiaries. An annuity that names revocable beneficiaries is available to the owner because the owner can change the beneficiary. This type of an annuity is considered a countable resource for purposes of the owner’s MABD eligibility. See subsection 29.09(d)(1) for information on how to value an annuity when it is a countable resource. Financial Methodologies Part 5 – Page 18 (Sec.29.00, Sub.29.07) (II) Annuity that can be surrendered, cashed in or assigned. An annuity that can be surrendered, cashed in or assigned by the owner is presumed to be a revocable annuity. A revocable annuity is considered a countable resource for purposes of the owner’s MABD eligibility. An annuity is presumed to be revocable when the annuity contract is silent on revocability. See § 29.09(d)(1) for information on how to value an annuity when it is a countable resource. (III) Annuity owned by someone other than the applicant or spouse. An annuity is an unavailable resource for purposes of MABD eligibility when the owner of the annuity is not the individual requesting MABD or the individual’s spouse, or the individual or their spouse has abandoned all rights of ownership. However, if payments from the annuity are being made to the individual (or spouse), those payments may be counted as income to the individual (or spouse). Standard of review (I) For the purposes of MABD eligibility: (i) An annuity in its accumulation phase is considered a countable resource of the owner because it can be liquidated or sold by the owner. See § 29.09(d)(1) for information on how to value an annuity when it is a countable resource. (ii) An annuity in its pay-out phase may be excluded as a resource of the owner if certain criteria are met. See § 29.08(d)(1) for information on the resource exclusion of an annuity. (II) For purposes of MABD for long-term care, an annuity purchased, or subjected to certain transactions, by an individual or their spouse on or after February 6, 2006, is subject to transfer review. See § 25.03(h) for information on transfer analysis of annuities. (iv) Mortgages The pledging of real estate or conveyance of an interest in land to a creditor as security for repayment of a debt. A mortgage owned by an individual, as the creditor, may be excluded as a resource if certain criteria are met. See § 29.08(d)(2) for information on the resource exclusion of a mortgage. If a mortgage is a countable resource of the individual, see § 29.09(d)(5) for information about the valuation of the mortgage. (v) Promissory notes Written promises to pay a certain sum of money to a certain person, the bearer, upon demand or on a specified date. A promissory note owned by an individual, as the bearer, may be excluded as a resource if certain criteria are met. See § 29.08(d)(2) for information on the resource exclusion of a promissory note. If a promissory note is a countable resource of the individual, see § 29.09(d)(5) for information about the valuation of the promissory note. (vi) Retirement funds. Any resource set aside by a member of the individual’s financial responsibility group to be used for self-support upon their withdrawal from active life, service, or business. Financial Methodologies Part 5 – Page 19 (Sec.29.00, Sub.29.07) Retirement funds include but are not limited to IRAs, Keogh plans, 401K plans, pensions, mutual funds, stocks, bonds, securities, money market accounts, whole life insurance, and annuities. The value of a retirement fund is the amount of money that can currently be withdrawn from the fund. See § 29.08(i)(5) for information on the resource exclusion of retirement funds. See § 29.08(f) for information on the exclusion of early withdrawal and surrender penalties. (vii) Health savings accounts (HSAs). Accounts used to set aside funds to meet medical expenses. Unless the individual can demonstrate that the funds in their HSA are not available to them, the HSA is a countable resource. Resources managed by a third party. Resources, liquid and nonliquid, managed by a third party include, but are not limited to, trusts, guardianship accounts, and retirement funds. Resources of a member of the financial responsibility group managed by a third party (e.g., trustee, guardian, conservator, or agent under a power of attorney) are considered available to the member as long as the member can direct the third party to dispose of the resource or the third party has the legal authority to dispose of the resource on the member’s behalf without the member’s direction. Definitions (i) Guardian. A person or institution appointed by a court in any state to act as a legal representative for another person, such as a minor or a person with disabilities. Guardianship funds are presumed to be available for the support and maintenance of the protected person. That person may rebut the presumption of the availability of guardianship funds by presenting evidence to the contrary, including, but not limited to, restrictive language in the court order establishing the account or in a subsequent court order regarding withdrawal of funds. (ii) Power of attorney. A written document signed by a person giving another person authority to make decisions on behalf of the person signing it, according to the terms of the document. Vermont law requires a power of attorney to be executed according to certain formalities, such as being signed, witnessed, and acknowledged. Funds managed by an agent under a power of attorney are not property of the agent and cannot be counted as resources of the agent. (iii) Representative payee. An individual, agency, or institution selected by a court or the SSA to receive and manage benefits on behalf of another person. A representative payee has responsibilities to use these payments only for the use and benefit of that person, to notify the payer of any event that will affect the amount of benefits the person receives or circumstances that would affect the performance of the representative payee’s responsibilities, and account periodically for the benefits received. Funds managed by a representative payee are not property of the representative payee and cannot be counted as resources of the representative payee. (iv) Trust. A trust is a property interest where property is held by an individual or an entity (called a “trustee”) subject to a fiduciary duty to use the property for the benefit of another person (the “trust beneficiary”). A trust includes a legal instrument or device that is similar to a trust but may not be called a trust. See § 29.08(e) for information on resource exclusion of trusts. The following are terms related to trusts: Grantor (also known as settler or trustor) Financial Methodologies Part 5 – Page 20 (Sec.29.00, Sub.29.08) (I) The person who transfers liquid or nonliquid property to another person or entity (the “trustee”), with the intention that it be held, managed, or administered by the trustee for the benefit of one or more persons (the “grantees”) In some cases, the grantor is named as a grantee. (II) A person is considered the grantor of a trust if: (i) The assets of the person were used to form all or part of the principal of the trust; and (ii) One of the following established the trust: (A) The person; (B) Another person, court, or administrative body, with legal authority to act in place of or on behalf of the person; or (C) Another person, court, or administrative body, acting at the direction of or upon the request of the person. Trustee. The person or entity (such as a bank or insurance company) that holds, manages, or administers trust property for the benefit of the trust’s grantee(s). In most cases, a trustee does not have the legal right to use the trust property for their own benefit. Some, but not all, trusts grant discretion to the trustee to use judgment as to when or how to handle trust principal or trust income. A trust may provide reasonable compensation to the trustee for managing the trust as well as reimbursement for reasonable costs associated with managing the trust property. Grantee (also known as beneficiary). The person or entity that receives the benefit of a trust. A trust can have more than one grantee at the same time; it can also have different grantees under different circumstances. Trust income (also known as trust earnings). Monies earned by the trust property. It may take various forms, such as interest, dividends, or rental payments. These amounts may be countable unearned income to any person legally able to use them for their support and maintenance. Trust principal (also known as trust corpus). The property that the grantor transfers to the trustee for the benefit of the grantee(s). Trust property. The sum of the trust principal and the trust income. Residual beneficiary. The person or entity named in the trust to receive the trust property upon termination of the trust.