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17.2.7.7 Community Spouse Divestment That Impacts the Institutionalized Person The transfer of assets by a community spouse is a divestment and must be evaluated if the transfer occurred within five years of the institutionalized person becoming eligible for long-term care Medicaid. Example 15 Ralph, a married man, went into the nursing home and applied for and was determined eligible for institutional Medicaid. One year after Ralph became eligible, Edith, Ralph’s community spouse, gave $30,000 to a nephew. This is an unallowable divestment and results in a penalty period for Ralph because it occurred within the first five years of his eligibility. 17.2.7.8 Transfer of Income in the Month of Receipt Income received and transferred in the month of receipt for less than FMV is an unallowable divestment and results in a penalty period. Example 16 Monte resides in a nursing home. He receives a pension check of $3,000 on January 1. Monte signs the check over to his son on January 5 and doesn’t receive anything in return. This is an unallowable divestment and results in a penalty period. Unless there is reason to believe otherwise, assume that monthly household income was spent by the institutionalized person on normal costs of living. 17.2.7.9 Transfer of the Right To Receive Income Transferring the right to receive nonexempt income by an applicant or member to someone else is a divestment and results in a penalty period. When a person has transferred income or the right to receive income, the penalty period is calculated based on the total amount of income transferred. Example 17 Donald transfers his rights to his $325,000 pension, which is paid in monthly payments of $4,500, to his daughter. This is an unallowable divestment and results in a penalty period. The worker must determine the divestment amount and penalty period. The divested amount is $325,000, not the $4,500 the daughter expects to receive each month from the pension. 17.2.7.10 Life Estate – Transferring the Property for Less Than FMV The transfer of property originally owned by a life estate holder to a remainder person without receiving FMV is an unallowable divestment and results in a penalty period. The divested amount is the FMV of the property at the time of the transfer minus the life estate value. To determine the life estate value, multiply the FMV of the property by the number from the 39.1 LIFE ESTATE AND REMAINDER INTEREST table corresponding to the age of the life estate holder at the time the property was transferred. Example 18 Marion, age 83, gave her home to her son John, retaining a life estate. The FMV of the house at the time of the transfer was $87,000. Two years later, Marion applied for Long Term Care Medicaid. Since the transfer of her home occurred in the look back period, it is an unallowable divestment and results in a penalty period. The worker must determine the divestment amount and penalty period. The divestment amount is the FMV of the house at the time of transfer, minus the life estate value. To determine the life estate value, multiply $87,000 by .38642 (the number from 39.1 LIFE ESTATE AND REMAINDER INTEREST table that corresponds to Marion’s age, 83, at the time of transfer). Marion is the life estate holder. John is the remainder person.