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The FMV of the life estate is determined using the age of the life estate holder and the property's FMV on the creation date of the life estate. Multiply the property’s FMV by the life estate multiplier on the table in 39.1 LIFE ESTATE AND REMAINDER INTEREST. The result is the value of the property's life estate interest as of that date. If the applicant paid more than FMV for the life estate interest, it is an unallowable divestment and the difference (what was paid minus the fair market value) is the divested amount. Example 27 Joyce, who is 75 years old, has $200,000 in her savings account. On February 3, she gives $200,000 to her son in exchange for a life estate interest in her son’s home. The FMV of the son’s home as of this transfer was $300,000. Joyce moved into her son’s home on March 5 and resided there continuously for more than 12 consecutive months. Fifteen months after moving in, Joyce applies for Family Care, meeting the functional eligibility criteria and all other Medicaid eligibility requirements. To determine if a divestment occurred, the worker applies the following tests: 1. Residence Test: Joyce establishes that as of her application date for Community Waivers programs, she has resided in her son’s home for more than 12 consecutive months. 2. FMV Test: Using the table in 39.1 LIFE ESTATE AND REMAINDER INTEREST, Joyce’s life estate interest was worth $156,447 ($300,000 FMV of the home X .52149 based on Joyce’s age) at the time of the purchase. Since Joyce paid $200,000 for a life estate that was worth $156,447, the divested amount is $43,553. Joyce is subject to a penalty period based on this amount. 17.2.7.15 Revocable Trusts Any payment made from a revocable trust created with an institutionalized person’s assets that is not to or for their benefit is an unallowable divestment and results in a penalty period. Example 28 Ray created a revocable trust with his assets. That trust is considered an available asset to Ray. Ray goes on vacation and takes several friends, paying for their lodging. Because this payment was not for Ray’s benefit, the payment is an unallowable divestment and results in a penalty period. 17.2.7.16 Irrevocable Trusts Assigned or Created During or After the Look Back Period Irrevocable trusts assigned or created during or after the look back period may be unallowable divestments and result in a penalty period. Examples of this are:

The institutionalized person created an irrevocable trust using his or her assets for some or all the trust. The divested amount is the total amount of the created trust.

Sometimes revocable trusts contain a clause allowing them to become irrevocable later in the life of the trust. The divestment occurs on the date the trust changed from revocable to irrevocable. The divested amount is the amount in the trust on that date. Example 29 In 1998, Benny created a revocable trust fund of $100,000 for his daughter. There was a clause in the trust stating the trust would become irrevocable if Benny became incompetent. He was determined incompetent on February 2, 2007, and the trust changed from revocable to irrevocable. Benny entered an institution and applied for Medicaid in July 2008. The trust changing from a revocable trust to an irrevocable trust is an unallowable divestment and results in a penalty period. He divested the total amount of the trust on February 2, 2007.

The institutionalized person added funds to the irrevocable trust. The divested amount is the amount of the added funds.