Revision 09-4; Effective December 1, 2009

The following rules are taken from Subchapter C, Financial Requirements, Division 4, Transfer of Assets.

§358.402. Transfer of Assets before February 8, 2006

(a) Introduction.

(1) The Omnibus Budget Reconciliation Act of 1993 (OBRA 1993) (P.L. 103-66) revised policy for transfers of assets that occur on or after August 11, 1993, when an uncompensated value remains.

(2) The penalty for transfers of assets affects payments for institutional facility services (nursing facility (NF) care, intermediate care facility for persons with mental retardation or related conditions (ICF/MR) provider services, care in state supported living centers and state centers, and care in institutions for mental diseases (IMD)) and eligibility for §1915(c) waiver program services. Both the recipient and the service provider are notified of the penalty period.

(3) Except for residents of state supported living centers and state centers, persons in an institutional setting remain eligible for all other Medicaid benefits and continue to receive monthly identification forms for the length of the penalty period. For residents of state supported living centers and state centers, Medicaid eligibility is denied for any penalty period resulting from an uncompensated transfer of assets. This is because the only Medicaid benefit a resident of a state supported living center or state center receives is provider payments.

(4) If the Medicaid eligibility of a person receiving services under a §1915(c) waiver program requires receipt of waiver services, then the person is ineligible for all Medicaid benefits for the length of the penalty period. Denial of §1915(c) waiver program services based on an uncompensated transfer of assets does not disqualify the person for pure Qualified Medicare Beneficiary (QMB) or Specified Low-Income Medicare Beneficiary (SLMB) benefits, as described in Chapter 359 of this title (relating to Medicare Savings Program).

(5) A person in a noninstitutional setting who is eligible for Medicaid may transfer assets without penalty, provided the person does not become institutionalized or apply for §1915(c) waiver program services. A transfer of assets does not affect eligibility for QMB or SLMB benefits.

(6) In spousal situations, if assets are transferred to a third party before institutionalization or by the community spouse, the Texas Health and Human Services Commission (HHSC) does not include the uncompensated amount of the transfer in calculating the spousal protected resource amount or countable resources upon application for Medicaid.

(b) Definitions. The following words and terms, when used in this section, have the following meanings unless the context clearly indicates otherwise.

(1) Person—"Person" includes the applicant or recipient, as well as:

(A) the person's spouse;

(B) an individual, including a court or administrative body, with legal authority to act in place of or on behalf of the person or person's spouse; and

(C) any individual, including a court or administrative body, acting at the direction or upon the request of the person or the person's spouse.

(2) Assets —

(A) Assets include all income and resources of a person and of the person's spouse, including any income or resources that the person or the person's spouse is entitled to but does not receive because of action:

(i) by the person or the person's spouse;

(ii) by an individual, including a court or administrative body, with legal authority to act in place of or on behalf of the person or the person's spouse; or

(iii) by any individual, including a court or administrative body, acting at the direction or upon the request of the person or the person's spouse.

(B) Actions that would cause income or resources not to be received include:

(i) irrevocably waiving pension income;

(ii) waiving the right to receive an inheritance;

(iii) not accepting or accessing injury settlements; and

(iv) a defendant diverting tort settlements into a trust or similar device to be held for the benefit of the plaintiff.

(c) Transfer of income.

(1) A person may incur a transfer penalty by transferring income on or after August 11, 1993. Transfers of income include:

(A) waiving the right to receive an inheritance even in the month of receipt;

(B) giving away a lump sum payment even in the month of receipt; or

(C) irrevocably waiving all or part of federal, state, or private pensions or annuities.

(2) The date of transfer is the date of the actual change in income, if on or after August 11, 1993. Interspousal transfers of income are permitted (for example, obtaining a court order to have community property pension income paid to a community spouse).

(3) Because revocable waivers of pension benefits can be revoked and the benefits reinstated, no uncompensated value is developed, and no transfer-of-assets penalty is incurred. Such waivers are subject to the utilization-of-benefits policy, and the person must apply for reinstatement of the full pension amount or the person is ineligible for all Medicaid benefits.

(d) Exceptions to transfers of assets.

(1) Transfer of the person's home does not result in a penalty when the title is transferred to the person's:

(A) spouse, who lives in the home (the transfer penalty applies when the community spouse transfers the home without full compensation);

(B) minor or disabled child (a disabled child must meet Social Security Administration disability criteria; there is no age limit for a disabled child for transfer of assets purposes);

(C) sibling who has equity interest in the home and has lived there for at least one year before the person transferred to an institutional setting; or

(D) son or daughter (other than a disabled or minor child) who lived in the home for at least two years before the person transferred to an institutional setting and provided care that prevented institutionalization. To substantiate this claim, there must be a written statement from the person's attending physician or a professional social worker familiar with the case documenting the care provided by the son or daughter.

(2) Assets, including the person's home, may be transferred without resulting in a penalty when:

(A) transferred to the person's spouse or to another for the sole benefit of that spouse, or from the person's spouse to another for the sole benefit of that spouse;

(B) transferred to the person's child or to a trust, including an exception trust described in §1917(d)(4) of the Social Security Act (42 U.S.C. §1396p(d)(4)), established solely for the benefit of the person's child. The child must meet Social Security Administration disability criteria. There is no age limit for a disabled child for transfer of assets purposes;

(C) transferred to a trust, including an exception trust as specified in §1917(d)(4) of the Social Security Act (42 U.S.C. §1396p(d)(4)), established for the sole benefit of a person under 65 years of age who meets Social Security Administration disability criteria;

(D) satisfactory evidence exists that the person intended to dispose of the resource at fair market value;

(E) satisfactory evidence exists that the transfer was exclusively for some purpose other than to qualify for Medicaid;

(F) imposition of a penalty would cause undue hardship;

(G) a person changes a joint bank account to establish separate accounts to reflect correct ownership of and access to funds; or

(H) a person purchases an irrevocable funeral arrangement or assigns ownership of an irrevocable funeral arrangement to a third party.

(3) In determining whether an asset was transferred for the sole benefit of a spouse, child, or person with a disability, there must be a written instrument of transfer, such as a trust document, which legally binds the parties to a specified course of action and which clearly sets out the conditions under which the transfer was made, as well as who can benefit from the transfer. The instrument or document must provide for the spending of the funds involved for the benefit of the person on a basis that is actuarially sound based on the life expectancy of the person involved. When the instrument or document does not so provide, there can be no exemption from the penalty. Exception trusts created under §1917(d)(4) of the Social Security Act (42 U.S.C. §1396p(d)(4)) are exempt from the actuarially sound distribution provisions of this section.

(4) The situations in paragraphs (1) - (3) of this subsection are the only situations in which an uncompensated transfer does not result in a penalty for care in an institutional setting. Under the transfer provisions of OBRA 1993, the home is not an excluded resource for a person in an institutional setting. Therefore, if the home of a person in an institutional setting is transferred, unless the transfer meets one of the criteria in paragraphs (1) - (3) of this subsection, it could affect payment for the person's care in an institutional setting.

(e) Look-back period.

(1) Penalties may be assessed for transfers occurring on or after the look-back date. Penalties cannot be assessed for time frames prior to the look-back period.

(2) The law prescribes a 36-month look-back period for most uncompensated transfers. However, there is a 60-month look-back period for certain transfers involving trusts. The look-back periods for trusts and distributions from trusts are defined in subparagraphs (A) and (B) of this paragraph.

(A) Revocable trusts.

(i) Payments from a revocable trust to or for the benefit of someone other than an applicant or recipient have a 60-month look-back period.

(ii) Making a revocable trust irrevocable with payments from corpus/income foreclosed to the applicant or recipient is a transfer of assets and has a 60-month look-back period.

(B) Irrevocable trusts.

(i) Payments from an irrevocable trust (where trustee distributions are not foreclosed to the applicant or recipient) which are made to (or for the benefit of) someone other than the applicant or recipient have a 36-month look-back period.

(ii) Creating an irrevocable trust where trustee payments are foreclosed to the applicant or recipient is a transfer of assets with a 60-month look-back period.

(iii) Creating an irrevocable trust where the trustee initially has discretion to make payments to the applicant or recipient (or for the applicant's or recipient's benefit), but where payments are foreclosed to the applicant or recipient at a later date is a transfer of assets as of the date payments are foreclosed to the applicant or recipient. The look-back period is 60 months.

(3) The look-back period is 36 months (or 60 months) from the later of the date of:

(A) institutionalization; or

(B) Medicaid application.

(4) When a person is already a Medicaid recipient before entering an NF, an ICF/MR, a state supported living center, a state center, or an IMD, the look-back period begins with institutional entry.

(5) When a person applies and is certified for Medicaid more than once because of multiple institutional stays or periods of ineligibility, the look-back date is based on the later of the earliest application for Medicaid or the initial entry into the facility.

(6) When a person applies for a §1915(c) waiver program, the look-back period is 36 months or 60 months from the later of the date:

(A) of application for waiver services (completed, signed application form is received in HHSC office); or

(B) after application that the person transfers assets.

(7) When a person applies for services in an institutional setting but is not certified and then reapplies, a new look-back period is based on the latest application.

(8) When a person applies and is certified for a §1915(c) waiver program, subsequently is denied, and reapplies for waiver services, the initial look-back period is still in effect.

(9) When a look-back period is established, the person is certified, and then moves from a Medicaid-certified long-term care facility to a §1915(c) waiver program or vice versa, the initial look-back period is still in effect. This is true even when there is a gap in eligibility periods.

(10) Any additional transfers of assets that occur after the person is certified for Medicaid may be assessed a penalty.

(f) Calculation of penalty period.

(1) There is no limit to the penalty period under OBRA 1993. The penalty period is determined by dividing the uncompensated value of all assets transferred by the average monthly cost of nursing facility care for a private-pay patient.

(2) The penalty period calculation applies to the transfer of both income and resources.

(3) The same penalty period calculation is used for a person who applies for a §1915(c) waiver program. Penalty periods continue to run if a person moves from a Medicaid-certified long-term care facility to a §1915(c) waiver program or vice versa.

(4) The penalty period begins the month of transfer. However, a new penalty period cannot be imposed while a previous penalty period is still in effect. Therefore, the penalty periods assessed under OBRA 1993 rules for multiple transfers that overlap run separately but consecutively. (5) If a penalty period ends and a subsequent transfer occurs, a new penalty period is established effective the month of the subsequent transfer. This means there may be a gap between penalty periods.

(6) When multiple transfers occur during the look-back period in such a way that the penalty periods for each overlap, the transfers are treated as a single event. The uncompensated values are lumped together and divided by the average monthly rate for a private-pay patient in a nursing facility. If multiple transfers occur in such a way that the penalty periods do not overlap, then the transfers are treated as separate events and the penalty periods are calculated separately.

(g) Apportioning penalty periods between spouses.

(1) When a person's spouse transfers an asset that results in a penalty for the person, the penalty period must, in certain instances, be apportioned between the spouses. Both spouses must be eligible for Medicaid in an institutional setting during the same time period for apportionment to occur. Apportionment occurs when:

(A) the spouse:

(i) is institutionalized and is Medicaid eligible; or

(ii) would be eligible for a §1915(c) waiver program; and

(B) some portion of the penalty against the person remains at the time the conditions in this paragraph are met.

(2) When one spouse is no longer subject to a penalty (for example, the spouse is no longer in an institutional setting, or the spouse dies), the remaining penalty period applicable to both spouses must be served by the remaining spouse.

(h) Return of transferred asset.

(1) For transfers occurring on or after August 11, 1993, if the transferred asset is subsequently returned to the person, the transfer is nullified and the penalty period is erased retroactive to the month of transfer. The asset is treated as though never transferred, and is excluded or counted, as appropriate, in determining the person's eligibility for those months in which the asset was in someone else's possession. In spousal cases, if the person or the person's spouse transferred an asset before the person entered the nursing facility and the asset is returned after institutionalization, the spousal protected resource amount must also be recalculated.

(2) For a penalty period to be nullified, all of the asset in question or its fair market value must be returned to the person. When only part of an asset or its equivalent value is returned, the penalty period can be reduced but not eliminated. For example, if only half the value of the asset is returned, the penalty period can be reduced by one-half. Payment on the principal of a note is the return of a transferred asset and reduces the penalty accordingly.

(i) Spouse-to-spouse transfers under spousal impoverishment provisions.

(1) There are no restrictions on interspousal transfers occurring from the date of institutionalization to the date of application; the reason is that at application and throughout the initial eligibility period (12 full months following the medical effective date), the combined countable resources of the couple are considered in determining eligibility. For the same reason, interspousal transfers are also permitted before institutionalization. A penalty can result when the community spouse transfers assets to a third party, not for the sole benefit of either spouse.

(2) To remain eligible at the end of the initial eligibility period, the person in an institutional setting must reduce resources to which the person has access at least to the resource limit. If the person chooses, the person may, during the initial eligibility period, transfer resources from his or her name to the community spouse's name with no penalty applied to the transfer. The transfer-of-assets policy applies only to transfer of assets for less than fair market value to someone other than the community spouse if not for the sole benefit of that spouse.

(3) Transfer penalties apply when the community spouse transfers his or her separate property before institutionalization, or after institutionalization but before certification. Transfer penalties apply when the community spouse transfers community property both before and after institutionalization, if not for the sole benefit of the spouse.

(j) Compensation. Compensation, in the form of funds, real property, or services, must actually have been provided to a person. Future compensation does not satisfy the compensation requirement except for annuities which are actuarially sound. Compensation, however, may be in the form of payment or assumption of a legal debt owed by the individual making the transfer. Compensation is not allowed for services that would be normally provided by a family member (such as house painting or repairs, mowing lawns, grocery shopping, cleaning, laundry, preparing meals, transportation to medical care). The person must provide valid receipts for financial expenditures or written statements from the individuals who were paid to provide the services. If the person receives additional cash compensation that was not a part of the transfer agreement from the party who received the transferred asset, the uncompensated value of the transferred asset must be reduced by the amount of the additional compensation and as of the date the compensation is received. Cash compensation includes direct payments to a third party to meet the person's food, shelter, or medical expenses, including nursing facility bills, incurred after the date of the transfer. Compensation for a transferred asset must be provided according to terms of an agreement established on or before the date of transfer. This agreement must have been established exclusively for purposes other than obtaining or retaining eligibility for Medicaid services.

(k) Participation in transfers. Any action by a person's co-owner(s) to eliminate the person's ownership interest or control of a joint asset, with or without the person's consent, is a transfer of assets. Placing another person's name on an account or other asset that results in limiting the person's control of an asset (right to dispose) is a transfer of assets.

(l) Rebuttal procedures.

(1) Notification of opportunity for rebuttal. If any amount of uncompensated value exists, HHSC advises the person or authorized representative of the amount of uncompensated value and the length of the penalty period. The penalty period applies unless the person provides convincing evidence that the disposal was solely for some purpose other than to obtain Medicaid services. If, within the periods specified in this paragraph, the person or authorized representative makes no effort to rebut the presumption that the transfer was solely to obtain Medicaid services, HHSC assumes that the presumption is valid. The rebuttal period is five working days after oral notification (by HHSC to the person) and seven working days after written notification.

(2) Rebuttal of the presumption. Transfer-of-assets statutes presume that all transfers for less than fair market value are to obtain Medicaid services. The person or authorized representative is responsible for providing convincing evidence that the transaction in question was exclusively for some other purpose. To rebut the presumption, the person or authorized representative must provide a written statement and any relevant documentation to substantiate his or her statement. The statement, oral or written, must include at least the following:

(A) purpose for transferring the asset;

(B) attempts to dispose of the asset at fair market value;

(C) reason for accepting less than fair market value for the asset;

(D) means of or plan for self-support after the transfer; and

(E) relationship to the person to whom the asset was transferred.

(m) Undue hardship.

(1) A person may claim undue hardship when imposition of a transfer penalty would result in discharge to the community and/or inability to obtain necessary medical services so that the person's life is endangered. Undue hardship also exists when imposition of a transfer penalty would deprive the person of food, clothing, shelter, or other necessities of life. Undue hardship relates to hardship to the person, not the relatives or responsible parties of the person. Undue hardship does not exist when imposition of the transfer penalty merely causes the person inconvenience or when imposition might restrict his lifestyle but would not put him at risk of serious deprivation.

(2) Undue hardship may exist when any one of the following conditions specified in subparagraphs (A) - (C) of this paragraph exists:

(A) location of the receiver of the asset is unknown to the person, or other family members, or other interested parties, and the person has no place to return in the community and/or receive the care required to meet his or her needs;

(B) the person can show that physical harm may come as a result of pursuing the return of the asset, and the person has no place to return in the community and/or receive the care required to meet his or her needs; or

(C) receiver of the asset is unwilling to cooperate with the person and HHSC, and the person has no place to return in the community and/or receive the care required to meet his or her needs.

(3) If a person claims undue hardship, HHSC makes a decision on the situation as soon as possible but within 30 days after receipt of the request for a waiver of the penalty. The person has the right to appeal an adverse decision on undue hardship.