Revision 16-4; Effective December 1, 2016

 

Resources generally are categorized as either "liquid" or "nonliquid." The difference between the two types of resources is important when determining if a resource can be excluded as non-business property essential to self-support. See Section F-4300, Resources Essential to Self-Support.

Liquid resources are cash or other assets, which can be converted to cash within 20 workdays.

Nonliquid resources consist of real and personal property, as well as financial instruments that cannot be converted to cash within 20 workdays (excluding holidays).

Ownership of real or personal property can include either sole possession or a partial interest.

Real property includes, but is not limited to:

  • land;
  • houses or immovable objects permanently attached to the land, whether associated with the home or separate from the home;
  • mineral rights;
  • burial spaces; and
  • life estates.

Personal property includes, but is not limited to:

  • automobiles and other motor vehicles,
  • household goods and personal effects, and
  • insurance.

Equity is the fair market value of the resource minus all money owed on it. Evaluate nonliquid resources, with the exception of some automobiles, according to their equity value.

 

F-4100 Types of Liquid Resources

Revision 10-3; Effective September 1, 2010

 

Liquid resources are cash or other assets, which can be converted to cash within 20 workdays.

Examples of resources that are ordinarily liquid are:

  • Annuities (see Section F-7000, Annuities)
  • Bonds
  • Cash
  • Financial institutions accounts (including savings, checking and time deposits, also known as certificates of deposit)
  • Life insurance policies
  • Loans
  • Mortgages
  • Mutual fund shares
  • Promissory notes
  • Retirement accounts (including individual retirement accounts and 401(k) accounts)
  • Stocks
  • Trusts, including revocable trusts and trusts in which the person can direct the use of the funds

Presume that these assets (and similar financial accounts and instruments) can be converted to cash within 20 workdays and are countable as resources. However, some liquid resources are not convertible to cash within 20 working days due to prevailing conditions of the assets. For example, the liquidity of U.S. savings bonds occurs after a minimum of one year. You can redeem them anytime after that time period.

 

F-4110 Cash

Revision 09-4; Effective December 1, 2009

 

Cash is a countable resource. Accept the person’s word for the amount of cash on hand.

See Appendix XVI, Documentation and Verification Guide

 

F-4120 Bank Accounts

Revision 16-4; Effective December 1, 2016

 

An individual's bank balance, as of 12:01 a.m. on the first day of the month for which eligibility is being tested, is a countable resource.

For redeterminations, the month being tested can be the month the redetermination form was received, the preceding two months or any month up to the month the review is completed.

Countable resources are reduced by the amount of funds encumbered before 12:01 a.m. on the first day of the month. See Section F-1311, Encumbered Funds. See required verifications in Appendix XVI, Documentation and Verification Guide. See Section I-3600, Administrative Procedures of Transfers of Nominal Amounts.

Notes:

  • Many financial institutions set up accounts with overdraft protection. Funds are available from one account to another by sharing the balances as needed without manually transferring funds. When considering encumbered funds and the reduction of an account balance, the reduction can be carried over to other shared accounts at the same financial institution.
  • An account reported as closed must be verified as having a $0 balance for the month(s) eligibility is determined or redetermined or must be verified as closed by the financial institution.See Section F-1312, Nursing Facility Payments and Refunds, for treatment of the payment arrangements made between the long-term services and supports provider and the individual before the individual was determined eligible for Medicaid or during a transfer of assets or substantial home equity penalty.

Verify the bank account balance with:

  • bank statements or completed Form H1239, Request for Verification of Bank Accounts. HHSC does not pay financial institutions to complete the form;
  • a letter from the financial institution;
  • a telephone contact with an employee of the financial institution using telephone contact documentation; or
  • written follow-up if unable to obtain information by telephone or information results in the applicant/person being ineligible.

The following information must be included in the case record:

  • name of the financial institution;
  • account number(s); and
  • amount of the balance as of 12:01 a.m. for the appropriate month(s).

If the verification the individual provides does not include the criteria listed above, ask explicitly for the information that is missing.

For example, in the request to the individual, indicate that missing information is needed. Request a copy of the bank statement or a letter from the bank. Indicate that the verification must include the following:

  • name of the bank;
  • account number(s); and
  • balance as of 12:01 a.m. for the specific month(s) for which you need verification.

 

F-4121 Joint Bank Accounts

Revision 09-4; Effective December 1, 2009

 

If a person has a joint bank account and can legally withdraw funds from it, all the funds in the account are considered a resource to the person.

If two or more eligible persons have a joint account with unrestricted access, the department considers that each owns an equal share of the funds. Eligible persons include any Qualified Medicare Beneficiaries (QMB) and Medicaid persons.

This equal ownership [principle] also applies when income is being diverted from the eligible spouse to the ineligible spouse and when income is deemed from an ineligible spouse or parent. In spousal diversion cases after the initial 12-month eligibility period, if the account has not been separated, the funds in the account are divided equally between the spouses for resource eligibility purposes beginning with the 13th month.

If a person is determined ineligible because of excess funds in a joint account, the person must be allowed an opportunity to disprove the presumed ownership of all or part of the funds. He must also be allowed to disprove ownership of joint accounts that do not currently affect his eligibility but may in the future.

Transfer-of-resources policy does not apply when a person changes a joint bank account to establish separate accounts in order to reflect correct ownership of and access to the funds.

In determining whether a person has successfully disproved ownership of funds, the department considers the following information.

  • If the source of the funds and all deposits are the person's money, but withdrawals are not made or used for the person's benefit, the department considers that the account is owned by the person.
  • If the source of the funds and deposits are from all the joint owners, but withdrawals are not made or used to benefit all joint owners, the department evaluates deposits and withdrawals to determine the amount owned by the person.
  • If the source of the funds and deposits are from individuals other than the person, and the withdrawals are used to benefit individuals other than the person, the department considers the disproval of ownership successful. In the same situation for source and deposit of funds, if withdrawals are used for the person's benefit, ownership of the funds may still be successfully disproved. However, the department considers any cash contributions as a potential source of income.

An example of an acceptable rebuttal of ownership of funds is when an account reflects a fiduciary relationship. See Section F-1232, Fiduciary Agent.

Note: Disproval of ownership policy applies to accounts in which there is no co-owner, but the person can show he does not own all of the funds, provided the funds are duly separated.

See Section E-3332, Income from Joint Bank Accounts, regarding treatment of income in these cases.

If a person wishes to disprove full or partial ownership, send him a form specifying the documentation needed and the date by which he is expected to provide it. Keep a copy of the form in the case record. Allow the person up to 30 days to provide:

  • completed, signed and dated Form H1299, Request for Joint Bank Account Information; and
  • evidence of a change in the account designation to remove the person's name from the account, restrict the person's access to the funds or establish separate accounts.

Notes:

  • If eligibility is affected, the items must be received prior to certification. If eligibility is not affected, do not delay certification pending receipt of the items.
  • If the person has been given time to disprove ownership and redesignate an account, monitor for compliance within the period specified.
  • If either the person or the co-holder is mentally incompetent or a minor, obtain the statement from a knowledgeable third party.

Reference: Refer to Section E-3332, Income from Joint Bank Accounts, regarding interest and deposits by co-holders of a joint account.

See Appendix XVI, Documentation and Verification Guide; Appendix XXV, Accessibility to Income and Resources in Joint Bank Accounts; and Section E-3331, Interest and Dividends, for treatment of income.

 

F-4122 Time Deposits

Revision 09-4; Effective December 1, 2009

 

The resource value of a time deposit is the net amount due after penalties are imposed for early withdrawal. If the funds cannot be withdrawn before maturity, the time deposit is not a resource until it matures. Time deposits include, but are not limited to, certificates of deposit, savings certificates and individual retirement accounts (IRAs).

A time deposit is a contract between an individual and a financial institution whereby the individual deposits funds for a specified period. In return, the financial institution agrees to pay an interest rate higher than the passbook rate.

The availability of funds is the controlling factor in determining whether a time deposit is a resource. Examine the person's time deposit certificate to determine when the funds can be withdrawn and which penalties to impose. Subtract the amount of the penalties from the total value to determine resource value.

If the person is a co-owner of a time deposit, use the procedures for jointly-owned resources.

The following information must be included in the case record documentation:

  • name of financial institution and account number,
  • account accessibility by person,
  • cash value as of 12:01 a.m. on the first day of the appropriate month, and
  • source of verification.

For applications, verify the account balance for the appropriate month(s). For redeterminations, use the most recent monthly bank statement, unless something indicates that the person may have exceeded the resource limit on the first day of the review month. Verify balance, name of financial institution and account number.

Note: If the statements are not received monthly and the statement does not cover the appropriate month, use other verification. There may be a penalty for early withdrawal.

A time deposit that is closed does not have to be reverified at subsequent redeterminations.

Sources of verification include:

  • bank statements,
  • completed Form H1239, Request for Verification of Bank Accounts,
  • letter from the financial institution, and
  • documented telephone contact with a knowledgeable source at the financial institution.

If a person cannot make an early withdrawal of the funds, verify and document the restriction. Also document the date that the time deposit matures. If maturity occurs before the next periodic review, schedule a special review.

 

F-4123 Patient Trust Funds

Revision 12-3; Effective September 1, 2012

 

A person may authorize a long-term care facility to manage his funds. The facility then acts as a fiduciary agent, using the funds only for the person's personal needs. The money in a patient trust fund is a countable resource.

See Appendix XVI, Documentation and Verification Guide.

Some facilities call the patient trust fund a "petty cash fund" and do not keep a ledger. In this case, check with a bookkeeper or other nursing home staff to determine if any funds are being held for a person.

Note: If a facility does not keep patient funds, record the fact that no patient trust fund exists. Use discretion to verify at applications or redeterminations that the facility does not maintain patient funds.

According to the Nursing Facility Requirements for Licensure and Medicaid Certification and the ICF/IID Standards for Participation, a facility must offer an individual the option of authorizing the facility "to hold, safeguard, manage, and account for the personal funds of the resident."

The Department of Aging and Disability Services (DADS) is responsible for monitoring patient trust funds. DADS has an agreement with the Department of State Health Services (DSHS) to conduct monitoring of ICF/IID trust fund accounts. DSHS began monitoring ICF/IID trust fund accounts in 2007.

See Section F-1312, Nursing Facility Refunds.

 

F-4124 Debit Accounts

Revision 13-4; Effective December 1, 2013

 

A debit card allows individuals electronic access to their personal funds. Debit cards can be attached to a bank account or can be preloaded with an individual user’s funds. Prepaid or preloaded debit cards can also be established with direct deposit of an individual’s wages.

Government benefits payments may be direct deposited to a debit card.

The most common prepaid debit cards used for deposit of government benefits, which do not have a separate account attached, include:

  • electronic benefit transfer (EBT) card accounts for TANF cash benefits;
  • TWC UI Visa® Debit Card issued by JPMorgan Chase Bank for unemployment insurance benefits (UIB);
  • Texas Debit Card issued by Wells Fargo® Bank, N.A. for child support payments through the Office of Attorney General (OAG);
  • debit cards for direct deposit of child support payments from other states; and
  • Direct Express® Debit MasterCard® issued by Comerica Bank exclusively for direct deposit of Social Security, Retirement, Survivors and Disability Insurance (RSDI) or Supplemental Security Income (SSI) benefits payments.

Wage payments may also be direct deposited to a debit card.

Some prepaid debit cards used for deposit of wage payments, which do not require a separate account, include:

  • ACE Elite Visa® Prepaid Debit Card,
  • Green Dot Prepaid Debit Card,
  • NetSpend® Prepaid Debit Card,
  • Prepaid Visa® RushCard, and
  • Walmart MoneyCard.

This list is not intended to be all inclusive as more agencies and businesses move toward the use of debit cards to issue benefits.

These types of cards function like prepaid debit cards and are not attached to a checking/savings account, so the requirement to provide the complete account number is not applicable. The number on the front of the debit card is not considered an account number. Do not copy or image the actual debit card.

The remaining cash value of the debit card as of 12:01 a.m. on the first day of the month following the month of the income deposit is a countable resource.

Account inquiry is accessible to:

  • TANF recipients, by calling the Lone Star Help Desk automated voice response system at 1-800-777-7328 (1-800-777-7EBT);
  • UIB recipients, online at www.myaccount.chase.com or at any Chase Bank automated teller machine (ATM) free of charge;
  • child support recipients in some states, online at www.eppicard.com*; and
  • Social Security recipients, online at www.USDirectExpress.com, by calling 1-888-741-1115, or balance information may be obtained free of charge at any ATM that displays the MasterCard® logo.

* Some states do not use the EPPICard for child support payments.

Verify the debit card balance with:

  • debit card statements, such as a printout from a website;
  • telephone contact with an employee of the financial institution using telephone contact documentation; or
  • the client’s statement, when client declaration is allowed.

When it involves a Social Security recipient, the specialist must also verify and document whether the person has a Direct Express® debit card or similar debit card that does not have a bank account number attached, or an Electronic Transfer Account (ETA) that is attached to a bank account and has an account number that must be verified. Follow policy in Section F-4120, Bank Accounts, when a person has an ETA.

For a debit card, the following information must be in the case record:

  • Name and address of the financial institution that issued the debit card
  • Last four digits of the debit card number
  • Amount of the balance as of 12:01 a.m. for the appropriate month(s)

If the verification that the person provides does not meet the three criteria listed, ask explicitly for the information that is missing.

Note: Direct Express® does not allow other income to be deposited, does not pay interest, and does not require a checking/savings account. It does allow one card for multiple beneficiaries, if the payee desires it.

 

F-4130 Stocks

Revision 10-2; Effective June 1, 2010

 

The resource value of a share of stock is the closing price on the last business day of the month before the month of redetermination or the last business day of the month before an appropriate “trial” month. For example:

  • SPRA month
  • Application month
  • Prior month
  • First eligible month

Shares of stock represent ownership in a corporation. The value of a stock fluctuates from day to day.

Determine the person's ownership of or interest in the stock. Also determine the current market value as of 12:01 a.m. for the appropriate date.

Note: Brokerage fees for selling a person's stocks are not allowable deductions when determining the value of the stocks.

See Section E-3331, Interest and Dividends, for treatment of income.

See Appendix XVI, Documentation and Verification Guide.

 

F-4140 Bonds

Revision 09-4; Effective December 1, 2009

 

The cash value of a bond is a countable resource. If a person can convert his bond into cash within 20 workdays, the bond is considered a liquid resource.

A bond is a written obligation to pay a sum of money at a future date.

Municipal and corporate bonds are negotiable instruments and they are transferable. U.S. savings bonds are not transferable, but they may be sold back to the government.

It generally takes seven to 10 days to sell a municipal or corporate bond. Certain U.S. savings bonds, however, must be held for a minimum period from the date of issue before they can be converted into cash. These bonds are not a countable resource during the period they cannot be converted into cash. Once the minimum period is passed, the bonds can be converted within one or two days.

Treat a municipal, corporate or government (other than U.S. savings bond) in the same way that stocks are treated. Depending on demand, the cash value may be more or less than the face value.

Determine ownership and cash value of a U.S. savings bond. (The value depends on the type of bond and the issue date.) Also determine whether the bond is a liquid or nonliquid resource. If the bond is a nonliquid resource, follow up with appropriate action when the minimum retention period has passed.

Certain additional conditions may prevail. For example, Series HH Bonds (for which interest is paid to the owner twice a year) may be cashed only after six months and after the first interest check is received. If the bond is cashed before maturity, there is a penalty.

See Section E-3331, Interest and Dividends, for treatment of income. See Appendix XVI, Documentation and Verification Guide.

 

F-4150 Promissory Notes, Loans and Property Agreements

Revision 09-4; Effective December 1, 2009

 

A promissory note is a written or oral, unconditional agreement by the purchaser to pay the seller a specific sum of money at a specified time or on demand.

A loan is a transaction whereby one party advances money to another party who promises to repay the debt in full, with or without interest. The terms of the loan may be in writing or they may be an informal oral agreement. A formal written loan agreement is a type of promissory note. A reverse mortgage is treated as a loan. The money received is not income. It is a resource the month after receipt. See Section E-1750, Proceeds of a Loan.

A property agreement is a pledge or security of a particular property or properties for the payment of a debt or the performance of some other obligation within a specified time. Property agreements on real estate (land and buildings) are generally referred to as mortgages, but may also be called land contracts, contracts for deed or deeds of trust.

Discounting is the advancement of money on a negotiable note or agreement and the deduction of interest or a premium in advance.

For example, a bank may be willing to pay $450 for a $500 promissory note due in one year's time. For a true discounting situation to exist, ownership of the note or agreement must transfer to the discounting agent.

A negotiable, secured promissory note, loan or property agreement is a countable resource. Negotiable means that the owner (lender) has the legal right to sell the instrument (for valuable consideration, such as cash) to anyone. Secured means the instrument identifies a particular asset of at least equal value to the face value of the instrument that can be reclaimed by the seller, should the instrument fall into default. The owner also possesses a transferable interest in the instrument that can be converted to cash and could be subject to a transfer of assets penalty if not retained or spent down properly. The terms of the loan may be in writing or may be an oral agreement. If the agreement is oral, the person is responsible for furnishing a statement of facts of the agreement signed by the second party. Real property, sold or exchanged for a negotiable note, is not a transfer for less than fair market value if the note is secured by the original property or by another redeemable resource of equal or greater value. A formal written loan agreement is a form of promissory note.

A negotiable non-secured promissory note, loan or property agreement is a countable resource and a potential transfer of assets. Non-secured means the seller has no recourse to reclaim the original or like resource should the purchaser cease payments. By not securing the note, the seller has purposefully reduced the value of the note. The actual fair market value of the note should be determined and the difference between the actual market value of the note and the value of the original resource is a transfer of assets for less than fair market value. The actual fair market value of the note remains a countable resource. Normal transfer of assets rebuttal policy applies.

See Section E-3331, Interest and Dividends, for the treatment of the interest.

Payment on the principal reduces the transfer penalty. The transfer penalty period is recalculated at each annual review until the expiration of the penalty period falls before the next scheduled annual review. Then a special review should be scheduled accordingly.

A non-negotiable promissory note, loan or property agreement is not a countable resource because it has no marketable value. Non-negotiable means the seller cannot sell or transfer ownership interest in the note, causing the note to have no market value. Therefore, the dollar value of the original resource is considered to be transferred for less than fair market value, subject to normal transfer of asset penalties, if the instrument was created within the look-back period. If payments are being received, the transfer penalty must be reduced based on the amount of principal received. Both the principal and interest are considered as income in the month received. The transfer penalty period is recalculated at each annual review, until the expiration of the penalty period falls before the next scheduled annual review. Then a special review should be scheduled accordingly. Normal transfer of assets rebuttal policy applies.

Note: This transaction is considered a transfer of assets for less than fair market value because the person/authorized representative knew or should have known that transferring ownership of the asset in exchange for a non-marketable note severely lessened the value of the note and in effect automatically reduced the countable assets of the person.

When determining the value of a negotiable promissory note, loan or property agreement, the outstanding principal balance is the countable value unless the person furnishes reliable evidence from a knowledgeable source that the instrument cannot be sold for the amount of the outstanding principal balance. A knowledgeable source is someone recognized as being in the business of purchasing notes.

If a person furnishes evidence to establish a lesser value on a note, the market value established by the knowledgeable source is the countable value of the resource. However, if the person/authorized representative placed any restrictions/encumbrances (such as creating a note with interest due of less than the market value at the time the note was made or the note becomes paid in full at the time of the person's death), then the difference in the current market value and the outstanding principal balance is a transfer of assets for less than fair market value.

Although the seller/person keeps title to the original property until the promissory note, loan or property agreement is paid in full, the original property is not counted as a resource (the value of the negotiable instrument is the resource). The property is not available while the buyer is making a good faith effort (making scheduled payments) in fulfilling the contractual obligation.

A note cannot be excluded under the $6,000/6% policy. This exclusion applies only to real property, or a degree of interest in real property, such as mineral rights.

 

F-4160 Prepaid Burial Contracts

Revision 09-4; Effective December 1, 2009

 

A prepaid (or preneed) burial contract is an agreement in which a person prepays his burial expenses and the seller agrees to furnish the burial.

Burial space items can be excluded only when the contract has been paid in full, or the contract specifies that burial space items are paid before funeral service items, and the refund value equals or exceeds the value of burial space items specified in the contract.

Otherwise, the amount paid toward the contract is treated as burial funds. If the contract has been paid in full or if the contract specifies that burial space items are paid first, burial space items must be separately itemized in the contract for the exclusion to apply.

Note: Paid in full means that the person owes no more payments.

The refund value is the amount that a person would receive upon revocation or liquidation of his burial contract.

A refund value is considered an available resource.

A refund penalty, often 10%, may be assessed for cancellation of a contract.

Note: Effective Sept. 1, 1993, under HB 2499 passed by the 73rd Texas Legislature, a person can irrevocably waive the right to cancel a prepaid burial contract. In these situations, there is no refund value. The prepaid contract is not a countable resource, but its value reduces the $1,500 burial fund exclusion dollar for dollar.

An irrevocable prepaid burial contract owned by the person, but not paid in full, reduces the $1,500 maximum burial fund exclusion by the face value of the contract, with no deduction for the value of burial spaces itemized in the contract.

If a prepaid burial contract is made irrevocable before an application is certified, the contract is considered irrevocable for the month of application and the three prior months.

Use the following procedure to calculate the exclusion for burial space items in a burial contract that contains separately identifiable burial space items/services:

 

F-4161 Treatment of Refund Penalty

Revision 09-4; Effective December 1, 2009

 

 

F-4161.1 No Refund Penalty

Revision 09-4; Effective December 1, 2009

 

Exclude the total value of the burial space items, which must be itemized in the contract.

 

F-4161.2 Refund Penalty

Revision 09-4; Effective December 1, 2009

 

Burial space items must be itemized in the contract.

Step Procedure
1 Divide the total value of burial space items in the contract by the face value of the contract. This is the percentage of the burial space value.
2 Multiply the refund value of the contract by the percentage from Step 1. This is the dollar amount of excludable burial space items.
3 Subtract the excludable amount from Step 2 from the refund value. This is the countable value of the contract.

F-4161.3 Examples of Refund Penalty

Revision 09-4; Effective December 1, 2009

 

Example 1:

The prepaid burial contract has a face value of $3,000. There was a 10% refund penalty, giving a refund value of $2,700. The value of burial space items is $1,500.

Step 1.

$1,500 ÷ $3,000 = 50%

Step 2.

Amount Description
$2,700 refund value
x .500 percentage from Step 1 (round to third decimal place)
$1,350 value of excludable burial space items

Step 3.

Amount Description
$2,700 refund value
–1,350 excludable value from Step 2
$1,350 countable value of prepaid contract

Example 2:

The prepaid burial contract has a face value of $2,405. There was a 10% refund penalty, giving a refund value of $2,164.50. The value of burial space items is $1,255.

Step 1.

$1,255 ÷ $2,405 = .5218

Step 2.

Amount Description
$2,164.50 refund value
x .522 percentage from Step 1 (round to third decimal place)
$1,129.87 value of excludable burial space items

Step 3.

Amount Description
$2,164.50 refund value
–1,129.87 excludable value from Step 2
$1,034.63 countable value of prepaid contract

 

Note: If there is a refund penalty, but the terms of the contract specify that the burial space items are paid first, exclude the total value of the burial space items that are itemized in the contract. The countable value is the refund amount minus the total value of the itemized burial space items.

The following information must be included in the case record documentation:

  • name of funeral home or insurance company, and contract number;
  • face value of contract and who owns it;
  • current cash value, if owned by the person;
  • reason for exclusion, if excluded; and
  • source of verification.

Verify purchaser, company name, contract number and beneficiary of contract.

Verify current refund value. If a prepaid burial contract is reported as owned by someone other than the person, verify ownership.

If a prepaid burial contract is owned by someone other than the person, determine whose money was used to purchase the contract and availability of funds to the person.

Sources of verification include the following:

  • copy of contract,
  • letter from funeral home, and
  • contact with funeral home representative.

Although this procedure may be used to complete the case if near the delinquency deadline, immediately follow up with verification by obtaining a copy of the contract or a letter from the funeral home.

Sources for verifying the refund value of a prepaid burial contract are the same as those in the preceding paragraph. In addition to the information required for verifying ownership and accessibility, the actual refund value after penalty involved in liquidation must be indicated on the contract or statement.

 

F-4170 Burial Contracts Funded by Life Insurance

Revision 12-3; Effective September 1, 2012

 

If life insurance is used to fund a burial contract, the person owns a life insurance policy. The contract has no value and is merely an instrument that explains the burial arrangement. Because the person purchased insurance and not the actual funeral service or merchandise items that may be listed in a burial arrangement, the person does not own the funeral service or merchandise items. The burial space items are treated differently based on the assignment of a burial contract funded by life insurance.

Some burial arrangements funded with life insurance have the life insurance ownership or proceeds assigned to a funeral director or home or a trust-type instrument. These assignments may be either revocable or irrevocable.

Ownership of a life insurance policy can be transferred or assigned to a funeral home without a transfer penalty if a prearranged contract provides burial services to the person. If a prearranged contract does not exist at the time of transfer, consider the cash value as a transfer of assets and explore a transfer penalty. See Chapter I, Transfer of Assets.

 

F-4171 Revocable Assignment

Revision 09-4; Effective December 1, 2009

 

If the assignment is revocable, the life insurance cash value is an accessible resource. Therefore, if the face value exceeds $1,500, the cash value is a countable resource. The burial space items are not excluded, but the $1,500 designated burial fund exclusion may apply.

Example: A person purchases a $3,000 face-value life insurance policy to fund a burial arrangement. The life insurance policy has a cash value of $1,800. The proceeds of the life insurance policy are revocably assigned to Sleepyhollow funeral director. The burial arrangement includes a casket for $1,200, a vault for $500, grave opening and closing costs for $100 and service items (transportation, flowers, clothing, use of chapel) for $1,200.

The burial space items are not excluded. The face value of the life insurance policy exceeds $1,500; therefore, the cash value is a countable resource that is accessible because the assignment is revocable. The $1,800 cash value is designated for burial and $1,500 is excluded. The remaining $300 is a countable resource.

 

F-4172 Irrevocable Assignment

Revision 09-4; Effective December 1, 2009

 

If assignment of ownership is irrevocable, the life insurance is not a resource because it is no longer owned by the person. The prepaid burial contract also is not a resource because it has no value independent of the life insurance policy. If the terms of the contract itemize the burial space items that have been purchased, the value of those items is disregarded in determining the amount of the irrevocable arrangement that reduces the $1,500 allowable burial fund exclusion.

If an irrevocably assigned, insurance-funded, prepaid burial contract is paid in full, HHSC automatically assumes that burial space items would be provided to the person, and the value of those items is disregarded in determining the amount of the irrevocable arrangement that reduces the $1,500 allowable burial fund exclusion.

Irrevocable assignment of life insurance policy ownership to the funeral home or director or to a trust-type instrument is not a transfer of resources.

An irrevocable prepaid burial contract for the person's burial, which is in force and which is owned by someone other than the person, whether paid in full or not, reduces the $1,500 maximum burial fund exclusion by the face value of the contract, with no deduction for the value of burial spaces itemized in the contract.

If a prepaid burial contract is made irrevocable before an application is certified, the contract is considered irrevocable for the month of application and the three prior months.

Example: Taking the above situation, the ownership is irrevocably assigned. The insurance-funded prepaid burial contract is paid in full or the terms of the contract indicate that the burial space items are actually owned by the person and that the provider is obligated to provide the items to the person upon request rather than only at the time of death.

The $1,200-casket + $500 vault + $100 grave opening and closing total $1,800. The $1,500 allowable for a designated burial fund is reduced by the $1,200 irrevocable funeral service arrangement. Up to $300 in additional designated burial funds is allowed for exclusion.

 

Amount Description
$3,000 face value
–1,800 excludable burial space items
$1,200 irrevocable funeral arrangement

Example: If the terms of the above contract do not obligate the provider to immediately make the burial space items available, the entire $3,000 irrevocable arrangement would be considered as a burial fund and no other funds allowed for exclusion as a designated burial fund.

 

F-4200 Nonliquid Resources

Revision 09-4; Effective December 1, 2009

 

There are two types of nonliquid resources:

  • Real property
  • Personal property

 

F-4210 Real Property

Revision 09-4; Effective December 1, 2009

 

Real property is the land and houses or immovable objects attached to the land. The terms real estate, realty and real property are synonymous, and for eligibility purposes, these terms designate real property in which an individual has ownership rights and interests. An individual also may have ownership of only the right to the use of the real property such as life estates or mineral rights. Real property also includes burial spaces.

The equity value of a person's ownership or part ownership in real property other than the home is a resource.

Determine ownership, current market value and equity value of non-home real property.

 

F-4211 Real Property in Excess of the Limit

Revision 16-3; Effective September 1, 2016

 

HHSC excludes the value of excess real property if the individual has put the property up for sale. The exclusion continues for as long as:

  • the individual continues to make reasonable efforts to sell the property (reference Section F-3130); and
  • including the property as a countable resource would result in a determination of excess resources.

Once the individual sells the property, the equity value the individual receives is a countable resource in the month following the month of sale. If the sale was for less than the fair market value or current market value, the sale of the property is subject to transfer-of-assets policy.

If the property rights involved are a life estate or if the individual has a remainder interest in the property, follow the procedures in Section F-4212, Life Estates and Remainder Interests. If the non-home real property produces income, follow the procedures in Section F-4300, Resources Essential to Self-Support.

See Appendix XVI, Documentation and Verification Guide.

If an individual's real property is producing income, use the procedures in Section F-4300.

 

F-4212 Life Estates and Remainder Interests

Revision 09-4; Effective December 1, 2009

 

When evaluating the life estate or remainder interest, determine when the interest was established.

If established before the look-back period, do not consider transfer of assets policy.

If established during the look-back period, consider transfer of assets policy:

  • If the individual retains an undivided partial interest or life estate in the property during the look-back period, see Section F-3100, The Home and Resource Exclusions.
  • If the purchase price of a life estate exceeds the fair market value of the life estate or a life estate is purchased on or after April 1, 2006, see Section I-6100, Purchase of a Life Estate, for evaluation of a transfer of assets.

The life estate or remainder interest may be excluded as follows.

A person may, without affecting his eligibility, maintain his life estate or remainder interest in property if:

  • the property is his home and can be excluded under Section F-3000, Home;
  • a contract restriction exists that prevents the person from disposing of his interest;
  • the property is producing income and may be excluded under the exclusion rule for income-producing property; or
  • the property is placed for sale. See Section F-3130, Home Placed for Sale.

If a life estate is excluded because of a person's intent to return to the property in which the person holds a life estate or remainder interest, and if that property is the person's principal place of residence, use the procedures in Section F-3000.

References:

  • Use the procedures in Section F-3000, Home, when a spouse or dependent relative is living in the home property in which the person has a life estate or remainder interest.
  • If a person's life estate or remainder interest property is producing income, use the procedures in Section F-5000, Potential Resource Exclusions.
  • If the purchase price of a life estate exceeds the fair market value of the life estate or a life estate is purchased on or after April 1, 2006, see Section I-6100, Purchase of a Life Estate, for evaluation of a transfer of assets.
  • See Appendix XVI, Documentation and Verification Guide.

 

F-4212.1 Calculation of Value of Life Estate or Remainder Interest

Revision 10-1; Effective March 1, 2010

 

When the life estate or remainder interest cannot be excluded, determine the value of the life estate or remainder interest as follows:

If the person has a life estate or remainder interest that is not excludable, determine the value of the resource according to the life estate holder's age and the equity value of the property. The person has the right to rebut this determination. To do so, he must present a statement from a knowledgeable source.

Note: Also see Appendix X, Life Estate and Remainder Interest Tables.

If the value given by the knowledgeable source is less than the value determined by the tables, use the rebuttal value.

For an individual's lifetime, a life estate transfers to the individual certain rights in property. The duration of the life estate is measured by the lifetime of the tenant, or by the occurrence of some event, such as remarriage of the tenant. In most situations, the owner of a life estate has the right to:

  • possess the property,
  • use the property,
  • get profits from the property, and
  • sell his life estate interest.

The contract establishing the life estate, however, may restrict one or more rights of the individual. The individual does not have fee simple title to the property nor the right to sell the entire property.

A remainder interest, which is created at the same time that a life estate is established, gives the "remainderman" (or remaindermen) the right to ownership of the property when the life estate holder dies.

An individual holding a remainder interest in property has the right to sell the remainder interest, unless prohibited from doing so by a legal restriction.

Use the following steps to determine the value of a life estate or remainder interest that cannot be excluded.

Step Procedure
1 Obtain the current market value of the property.
2 Obtain the equity value of the property by subtracting any amount owed on the property.
3 Select the table in Appendix X, Life Estate and Remainder Interest Tables, for life estate or remainder interest.
4 Find the line for the life estate holder's age as of the holder's last birthday.
5 Multiply the figure in the appropriate life estate column or remainder interest column by the current equity value of the property.

F-4213 Mineral Rights

Revision 10-1; Effective March 1, 2010

 

Mineral rights are the ownership interests in natural resources such as coal, oil or natural gas, which normally are extracted from the ground.

The value of a person's ownership of or interest in mineral rights is a resource.

  • A person's mineral rights do not affect his eligibility if his equity in them does not exceed $6,000 and he receives a net annual rate of return of at least 6% of the equity value. See Section F-4310, Nonbusiness Property – $6000/6%.
  • Ownership of mineral rights may or may not be associated with ownership of land. Surface rights are ownership interests in the exterior or upper boundary of land. Ownership in one does not automatically indicate ownership in the other.
  • If the person owns the land to which the mineral rights pertain, the value of the land can be assumed to include the value of the mineral rights. Additional development is unnecessary.

In many instances, owners of mineral interests may lease their rights to an oil or mining company for exploration and development. Terms of leases may vary from one to five years or more, although five is most common. Besides a yearly rental fee for each acre, it is customary for a company to pay a one-time bonus to an individual for signing the lease. The specific amounts are stated in the lease agreements. If minerals are produced from the property, the company may suspend yearly rental payments.

Although under lease, the owner may sell his mineral rights at any time. Their value is based on the probability of oil, gas or minerals being present if the land is not in production. If minerals are being produced, value is decided by the size of the interest, length of time the minerals have been produced, quality of the product (oil or gas) being produced and many other factors.

Determine the person's ownership share of the mineral rights and the equity value.

Reference: If the mineral rights cannot be excluded under the $6,000/6% rule, count the individual's equity together with his other countable resources.

See Appendix XVI, Documentation and Verification Guide.

 

F-4214 Burial Spaces

Revision 14-4; Effective December 1, 2014

 

A burial space, or an agreement that represents the purchase of a burial space held for the burial of the person, the person’s spouse or any other member of the person’s immediate family, is an excluded resource, regardless of value. The person or a family member whose resources are deemed to the person must own the burial space or purchase agreement.

Burial Space — A burial space is a burial cemetery plot, gravesite, crypt or mausoleum.

Burial space items are a casket, urn, niche or other repository customarily and traditionally used for the deceased's bodily remains. The term also includes necessary and reasonable improvements or additions to these spaces, including but not limited to: vaults, headstones, markers or plaques; burial containers (for example, for caskets); arrangements for the opening and closing of the gravesite; and contracts for care and maintenance of the gravesite. Contracts for care and maintenance are sometimes referred to as endowment or perpetual care.

For items that serve the same purpose, HHSC excludes only one per person. For example, a cemetery plot and a casket for the same person can be excluded, but not a casket and an urn.

Immediate family includes the person's spouse, minor and adult children, stepchildren, adopted children, brothers, sisters, parents, adoptive parents and the spouses of those individuals. It does not include grandchildren or the immediate family of the person’s spouse.

If a person owns a burial space that is not excludable, HHSC counts the equity value of the space as a resource.

Until the purchase price is paid in full, a burial space is not "held for" a person under an installment sales contract or similar device if the:

  • person does not currently own the space,
  • person does not currently have the right to use the space, and
  • seller is not currently obligated to provide the space.

Until all payments are made on the contract, HHSC considers the amounts already paid as burial funds.

HHSC excludes from income and resource determinations the interest that is earned on the value of the agreement to purchase excluded burial spaces and that is left to accumulate.

See Appendix XVI, Documentation and Verification Guide.

Exclude all burial cemetery plots that are fully paid, regardless of designation. However, if the individual acknowledges that the cemetery plots are purchased as an investment, count the equity value.

Ownership of a burial cemetery plot in another state does not affect residency requirements or excludability.

 

F-4215 Nonliquid Resources Located Outside the State

Revision 09-4; Effective December 1, 2009

 

If a person owns or has an interest in property outside the state, equity in that property is a resource if it is available to him. The exclusion provision for a person's home does not apply when the home property is located outside the state.

Reference: See Section F-3000, Home, and Section F-4211, Real Property in Excess of the Limit.

Determine the type of property and its location. Also determine ownership and availability, current market value and equity value. If legal questions about the availability of the person's property or other states' property laws occur, consult the regional attorney.

Follow this handbook's verification and documentation procedures for the particular resource owned by the person.

 

F-4220 Personal Property

Revision 09-4; Effective December 1, 2009

 

The following items cover nonliquid resources other than real property.

 

F-4221 Automobile

Revision 15-4; Effective December 1, 2015

 

As used in this section, the term automobile includes, in addition to passenger cars, other automobiles used to provide necessary transportation.

Document the year, make and model of all automobiles.

Exclude one automobile, regardless of value.

Exclude a second automobile when the household is made up of more than one individual and:

  • the additional member of the household requires an additional automobile for transportation to and from work because the original individual needs one automobile for medical use at all times; or
  • the additional member of the household requires a vehicle modified for someone with a disability for transportation, and the automobile is specially equipped for that additional household member.

For all other automobiles, use the current market value. If the applicant/person still owes on the automobile, consider the current market value and equity value. If the equity value is less than the market value, document the formula used to determine the countable value. Indicate the source used to verify the current market value and equity value.

Verify the market value of an automobile in any of the following situations:

  • The applicant's/person's statement is not reasonable.
  • The applicant/person owns more than one automobile.

Sources for verifying the value of an automobile include:

  • Kelley Blue Book or NADA guidebook (trade-in wholesale value),
  • Hearst Corporation Black Book,
  • statement from an automobile dealer,
  • newspaper ads, or
  • a source knowledgeable about antique automobiles. (In the Texas Integrated Eligibility Redesign System [TIERS], use "other acceptable" and document in case comments.)

Note: If the automobile is being declared as "junk" (not running or fixable), a $0 default value may be assigned.

For additional information about automobiles, see Appendix XVI, Documentation and Verification Guide.

Examples:

  • A person and the person's ineligible spouse owned an automobile that had a current market value of $5,800. They still owed $2,000 toward the total price. The eligibility specialist did not count the automobile as a resource. (The equity value is irrelevant for the first automobile.)
  • The person's spouse later obtained a job and purchased a second automobile. The eligibility specialist reviewed the person's case. It was discovered that a family member stays with the person while the spouse works. The family member used the first automobile to transport the person to the doctor and to therapy. The spouse was using the second automobile for transportation to and from the job. The eligibility specialist excluded the total value of the second automobile since the spouse used it to go back and forth to work and the first automobile was being used to take the person for medical treatment at the same time.
  • The following year, the spouse encountered mechanical difficulties with the second automobile and decided to buy another used automobile that was in better condition for $6,000. No automobiles were traded in as part of the purchase. The spouse made a down payment of $400 on the third automobile and made two monthly payments of $200 each.

The eligibility specialist reviewed the case and excluded the first automobile. The eligibility specialist excluded the third automobile because the spouse was using the automobile for transportation to and from work.

The eligibility specialist will need to develop the current equity value of the second automobile that has mechanical difficulties to determine the countable resource value for this non-excluded automobile.

 

F-4222 Household Goods and Personal Effects

Revision 12-4; Effective December 1, 2012

 

Do not count household goods as a resource to an individual (and spouse, if any) if they are:

  • items of personal property, found in or near the home, that are used on a regular basis; or
  • items needed by the householder for maintenance, use and occupancy of the premises as a home.

Such items include, but are not limited to, furniture, appliances, electronic equipment such as personal computers and television sets, carpets, cooking and eating utensils, and dishes.

Do not count personal effects as resources to an individual (and spouse, if any) if they are:

  • items of personal property ordinarily worn or carried by the individual;
  • items having an intimate relation to the individual;
  • items of cultural or religious significance to the individual; or
  • items required because of the individual's impairment.

Such items include, but are not limited to, personal jewelry (including wedding and engagement rings), personal care items, prosthetic devices, and educational or recreational items such as books or musical instruments.

Do count items that were acquired or are held for their value or as an investment These items are:

  • countable resources (unless excluded under a different resource exclusion);
  • not considered a household good or personal effect for the purposes of this exclusion; and
  • treated as other personal property.

See F-4222.1, Other Personal Property, for more information.

 

F-4222.1 Other Personal Property

Revision 12-4; Effective December 1, 2012

 

Items that were acquired or held for their value or as investments are considered other personal property and are countable resources unless excluded under normal resource exclusions.

Other personal property can include, but is not limited to gems, animals purchased for breeding, re-sale or investment, or collectibles such as coin, stamp or doll collections.

Example: A coin collection is considered other personal property (nonliquid personal property) and the countable resource amount is based on the collector's value. The individual coins in the collection are not liquid resources based on their face value.

Other personal property may be contained in a safe deposit box. If the person's application shows that he has a safe deposit box, question him about its contents.

The following information must be included in the case record documentation:

  • description of property and person's estimate of value;
  • reason for exclusion, if excludable; and
  • equity value and source of verification, if not excludable.

To develop the value of other personal property, obtain the market value of the items and determine whether the person has clear ownership. If any encumbrances exist, such as payments due, deduct the unpaid portions to arrive at the equity value of the items.

Sources for verifying the value of other personal property are:

  • retailers;
  • antique dealers;
  • collectors (for example, stamp or coin collectors/dealers); and
  • newspaper ads.

Sources for verifying a person's equity value in other personal property are:

  • copy of the purchase contract;
  • statement from the creditor showing the amount paid for an item and the amount still due; and
  • payment schedule.

 

F-4223 Life Insurance

Revision 12-3; Effective September 1, 2012

 

Reference: See also Section F-4170, Burial Contracts Funded by Life Insurance.

If the total face value of life insurance policies owned by a person (or spouse, if any) is $1,500 or less per person, HHSC does not consider as a resource the value of the life insurance.

If the total face value of all life insurance policies owned by a person, eligible spouse or ineligible spouse whose resources are deemed to the person are more than $1,500 per insured person, the cash surrender values of the policies are resources.

This also includes policies owned on other individuals. HHSC does not include dividend additions with the face value of a life insurance policy to determine if the policy is excluded as a resource. A life insurance policy is a resource available only to the owner of the policy, regardless of whom it insures.

The following terms are used in connection with life insurance policies: The insured is the individual upon whose life a whole life or straight life policy is affected.

  • The beneficiary is the individual (or entity) named in the contract to receive the proceeds of the policy upon the death of the insured.
  • The owner is the individual with the right to change the policy as he may see fit. The owner is the only individual who can receive the cash surrender amount of the policy.
  • The insurer-assurer is the company that contracts with the owner.
  • The face value amount is the basic death benefit or maturity amount, which is specified on the policy's face. The face value does not include dividends, additional amounts payable because of accidental death or other special provisions.
  • The cash surrender value is the amount that the insurer pays if the policy is cancelled before death or before it has matured. The cash surrender value usually increases with the age of the policy.
  • A participating life insurance policy is one in which dividends are distributed to the policy holder.
  • A nonparticipating life insurance policy means that dividends are not distributed to the policy holders.
  • Default is the failure to pay the insurance premiums. There may be conditions in the policy relating to default.
  • Ordinary life insurance (also known as whole life or straight life) is a contract for which the owner pays premiums and the insurer pays the face amount of the policy to the beneficiary upon the death of the insured.
  • An individual policy is a policy that is paid for entirely by the owner.
  • A group policy is usually issued through an employer or organization. The premiums may include some contribution from the employer. Group insurance is usually term insurance.
  • Dividends are shares of surplus funds allocated to the policy holders of participating insurance policies. They generally represent a previous overpayment of premiums. Dividends may be received as cash payments; used to reduce future premium payments; applied to the existing insurance to increase coverage; or left as a separate accumulation of funds that draw interest.

Note: Ownership of a life insurance policy can be transferred or assigned to a funeral home without a transfer penalty if a prearranged contract provides burial services to the person. If a prearranged contract does not exist at the time of transfer, consider the cash value as a transfer of assets and explore a transfer penalty. See Chapter I, Transfer of Assets.

 

F-4223.1 Policy and Procedure

Revision 15-4; Effective December 1, 2015

 

A life insurance policy is a resource if it generates a cash surrender value (CSV). The life insurance contract’s value as a resource is the amount of the CSV. In this case, the term contract refers to an insurance policy. An insurance policy is considered to be a contract between the insurance company and the policyholder.

Ordinary life insurance (also known as whole life or straight life) has a CSV usually after the second year. The policy is flexible in premium payments if the dividends are used to pay off the contract at an earlier date, or the premium payment period can be limited to suit the financial resources of the insured. In a situation of this type, the policy is a limited payment life insurance policy.

This resource has a limited exclusion. A life insurance policy is an excluded resource if its face value (FV) and the FV of any other life insurance policies the person owns on the same insured person total $1,500 or less. The family relationship between the person who owns the policy and the insured does not affect this exclusion.

FV is the amount of basic death benefit contracted for at the time the policy is purchased. The face page of the policy may show it as such, or as the:

  • amount of insurance,
  • amount of this policy,
  • sum insured, etc.

A policy's FV does not include:

  • the FV of any dividend addition, which is added after the policy is issued (see Section 4224.1, Dividend Additions and Accumulations);
  • additional sums payable in the event of accidental death or because of other special provisions; or
  • the amount(s) of term insurance, when a policy provides whole life coverage for one family member and term coverage for the other(s).

In determining whether the total FV of the life insurance policies a person owns on a given insured person is $1,500 or less, the FV of the following are not taken into account:

  • burial insurance policies, and
  • term insurance policies that do not generate a CSV.

Do not include the FV of dividend additions in determining whether a policy is a countable or excludable resource. If the policy is a countable resource, include the CSV of dividend additions in determining the resource value of the policy.

Example: A person and his spouse each own a $1,500 whole life policy. The person also owns a $1,000 policy on each of his three children and a nephew. Although the total FV of the insurance owned by the person exceeds $1,500, none of the cash value is countable because the FV per insured individual does not exceed $1,500.

Relation to Burial Fund Exclusion — The maximum of $1,500 that can be excluded and set aside for the burial fund expenses of the person must be reduced by the FV of:

  • any excluded insurance policy covering the life of the person (or spouse, if applicable) that is excluded under this provision; and
  • any amount held in an irrevocable trust, burial contract or other irrevocable arrangement for the individual's (or spouse's) burial expenses, except to the extent that it represents excludable burial spaces.

This includes the FV of a life insurance policy for which a funeral provider has been made the irrevocable beneficiary, if the policy owner has irrevocably waived his or her right to, and cannot obtain, any CSV that the policy may generate. The burial fund exclusion is based on family relationship. The maximum of $1,500 that can be excluded as set aside for burial expenses is only allowed for the recipient and the recipient’s spouse unless deeming of assets is involved. See Section F-4227, Burial Funds, for more details on the burial fund exclusion.

 

F-4223.2 Documentation and Verification

Revision 09-4; Effective December 1, 2009

 

The following information must be included in the case record documentation:

  • name of insurance company, policy number and face value(s);
  • type of insurance coverage (whole, term or burial insurance); and
  • source of verification.

Sources of verification include:

  • copy of policy;
  • letter from insurance company or organization, as appropriate;
  • completed Form H1238, Verification of Insurance Policies; and
  • documented telephone contact with representative of issuing company or organization.

If a person owns any life insurance policies, determine the:

  • FV of each policy,
  • type of insurance,
  • insured per policy, and
  • cash surrender value if not excluded.

Verify with the insurance company whether there is a policy in force if the person reports any whole life insurance policies that are now lapsed due to non-payment.

To determine the approximate cash value of a whole life policy, use the table of values on all whole life insurance policies.

Obtain the actual cash surrender value from the insurance company when:

  • the person cannot provide a copy of the insurance policy;
  • the person's total resources, including the approximate cash value of whole life insurance policies, is approaching maximum resource limits. Request cash value as of 12:01 a.m. first day of the month;
  • prior to denial of assistance because of excess resources; and
  • the person reports any outstanding loans against the policy.

To verify the actual cash surrender value, send Form H1238 and Form H0003, Agreement to Release Your Facts, to the insurance company or contact the insurance company by telephone and follow up with these forms.

Determine if a policy is paying dividends to the insured by looking for the words participating or non-participating on the document. If unable to locate these identifying words, send a letter to the insurance company.

If a policy is non-participating and verification substantiates an exclusion of the policy, no further verification is necessary.

If a policy is participating, obtain the following information from the insurance company:

  • how dividends are paid,
  • the amount of dividends paid, and
  • how often the dividends are paid.

If a person has a participating policy, determine whether dividends are used to:

  • purchase additional insurance,
  • increase the value of existing insurance policy coverage,
  • apply toward the payment of premiums, or
  • pay cash to the policyholders.

If the dividends are left to accumulate, treat them as a savings account. The dividends are not considered as part of the cash value. The person can withdraw them without touching the cash value.

Note: Separate accumulation of funds that draw interest. These funds are always a countable resource, even if the face value is less than $1,500. These funds may be designated for burial.

See Appendix XVI, Documentation and Verification Guide.

 

F-4224 Life Insurance Dividends

Revision 10-1; Effective March 1, 2010

 

Periodically (annually, as a rule), the life insurance company may pay a share of any surplus company earnings to the policy owner as a dividend. Depending on the life insurance company and type of policy involved, dividends can be applied to premiums due or paid by check or by an addition or accumulation to an existing policy. When dividends are used to increase cash value (CV) but they do not increase face value (FV) of the policy, exclude the dividends if the FV of all whole life polices per individual is no greater than $1,500 and count the cash surrender values of the policies as resources if the FV of all whole life policies per insured person is greater than $1,500.

See Appendix XXXV, Treatment of Insurance Dividends.

 

F-4224.1 Dividend Additions and Accumulations

Revision 09-4; Effective December 1, 2009

 

Additions — Dividend additions are amounts of insurance purchased with dividends and added to the policy, increasing its death benefit and cash surrender value (CSV). The table of CSVs that comes with a policy does not reflect the added CSV of any dividend additions.

Do not include the face value (FV) of dividend additions in determining whether a policy is a countable or excluded resource. If the policy is:

  • a countable resource, include the CSV of dividend additions in determining the resource value of the policy.
  • an excluded resource, do not include the CSV of dividend additions in determining the individual's countable resources.

Accumulations — Dividend accumulations are dividends that the policy owner has constructively received but left in the custody of the life insurance company to accumulate interest, like money in a bank account. They are not a value of the policy, but the owner can obtain them at any time without affecting the policy's FV or CSV.

Dividend accumulations cannot be excluded from resources under the life insurance exclusion, even if the policy that pays the accumulations is excluded from resources.

Unless dividend accumulations can be excluded under another provision (for example, as set aside for burial under the burial fund exclusion), they are a countable resource.

Do not exclude dividend accumulations under the life insurance provision, even if the policy that pays the accumulations is excluded. Unless the accumulations are excludable under another provision (for example, because they have been set aside for burial), count the accumulations as resources, even if the policy itself is excluded because the policy's FV is $1,500 or less.

 

F-4225 Accelerated Life Insurance Payments

Revision 09-4; Effective December 1, 2009

 

Other insurance issues can occur, such as accelerated life insurance payments.

Accelerated life insurance payments are proceeds paid to a policyholder before death. Although accelerated payment plans vary from company to company, all of the plans involve early payout of some or all of the proceeds of the policy. Most accelerated payment plans fall into three basic types, depending on the circumstances that cause or “trigger” the payments to be accelerated. These are the:

  • long-term care model, which allows policyholders to access their death benefits should they require extended confinement in a care facility or, in some instances, health care services at home;
  • dread disease or catastrophic illness model, which allows policyholders to access their death benefits if they contract or acquire one of a number of specified covered conditions; and
  • terminal illness model, which allows policyholders to access their death benefits following a diagnosis of terminal illness where death is likely to occur within a specified number of months.

Some companies refer to these types of payments as “living needs” or “accelerated death” payments.

Depending on the type of accelerated payment plan, receipt of accelerated payments may reduce the policy's face value (FV) by the amount of the payments and may reduce the cash surrender value (CSV) in a manner proportionate to the reduction in FV. In some cases, a lien may be attached to the policy in the amount of the accelerated payments and a proportionate reduction in CSV results. Since accelerated payments can be used to meet food or shelter needs, the payments are income in the month received and a resource if retained into the following month and not otherwise excludable. The receipt of an accelerated payment is not treated as a conversion of a resource for Medicaid purposes. This is because, under an accelerated arrangement, a person receives proceeds from the policy, not the policy's resource value, which is its CSV.

 

F-4225.1 Life Settlement

Revision 14-3; Effective September 1, 2014

 

A life settlement allows an individual to sell a life insurance policy for a lump-sum payment that is less than the expected death benefit but more than the available cash value. The Texas Department of Insurance regulates life settlements. An individual may place proceeds from a life settlement contract into an irrevocable life settlement account. The irrevocable life settlement account can be designated to pay for the individual’s long-term services and supports (LTSS), including, but not limited to, home health, assisted living and nursing home services.

A life settlement contract is an agreement between the owner of a life insurance policy and the life settlement provider or investor that is purchasing the life insurance policy.

A life settlement account is a bank account established with proceeds from a life settlement contract, which can be used to pay for the individual's long-term care services.

In order to be excluded for eligibility purposes, a life settlement contract must:

  • direct the proceeds from the transaction into an irrevocable, state or federally insured account;
  • specify that the proceeds be used for payment of LTSS expenses;
  • specify the total amount payable for LTSS expenses; and
  • indicate the amount of the reserved death benefit and the irrevocable beneficiary.

In order to be excluded for eligibility purposes, a life settlement account must:

  • be irrevocable,
  • be state or federally insured,
  • allow payments for LTSS and/or medical expenses, and
  • indicate the total amount payable for LTSS expenses.

If a life settlement account does not meet all of the above requirements:

  • consider the proceeds from the transaction a countable resource; or
  • if the proceeds are no longer accessible to the individual, explore transfer of assets.

Note: Consider any payments made from the life settlement account, such as bank fees, legal fees or other administrative costs, as income to the individual in the month the payment is made.

 

F-4226 Term and Burial Insurance

Revision 10-1; Effective March 1, 2010

 

Term insurance and burial insurance are not resources.

Burial insurance is a form of term insurance. By its terms, burial insurance can only be used to pay the burial expenses of the insured.

Term insurance is a contract of temporary protection. The insured pays relatively small premiums for a limited number of years, and the company agrees to pay the face amount of the policy only if the insured dies within the time specified in the policy. It has no cash surrender value.

If a term insurance policy has been purchased by a life insurance company and premiums are used to purchase separate whole life coverage, the whole life coverage is subject to the policy as described in Section F-4223, Life Insurance.

If the term insurance policy is a participating life insurance policy, any dividend accumulation at interest is a countable resource.

Appendix XXXV, Treatment of Insurance Dividends, indicates that dividends are used to purchase term insurance; disregard the dividends as income or a resource.

 

F-4226.1 Policy and Procedure

Revision 09-4; Effective December 1, 2009

 

Term Life Insurance — Life insurance with no cash or loan value or no potential for cash or loan value. The term life insurance policy is for temporary protection. The insured pays relatively small premiums for a limited number of years and the company agrees to pay the face amount of the policy only if the insured dies within the time specified in the policy. Term life insurance with HHSC while employed is an example of this type of life insurance. Some companies sell term insurance with the premiums to be paid for the insured's whole lifetime. If Form H1238, Verification of Insurance Policies, indicates that there is no potential for cash value and the Form H1238 indicates whole life, contact with the company will be needed to clarify this discrepancy.

Burial Insurance — A form of term insurance. By the terms of the burial insurance policy, burial insurance can only be used to pay the burial expenses of the insured.

The dividend accumulation is a countable resource, like the balance of a savings account.

The interest accrued on the dividends would be excluded from income when paid. Interest left to accumulate becomes part of the countable resource.

The following information must be included in the case record documentation:

  • name of insurance company, policy number and face value(s);
  • type of insurance coverage (that is, term or burial insurance); and
  • source of verification.

Sources of verification include:

  • copy of policy;
  • letter from insurance company or organization, as appropriate;
  • completed Form H1238; and
  • documented telephone contact with representative of issuing company or organization.

 

F-4227 Burial Funds

Revision 13-4; Effective December 1, 2013

 

HHSC excludes up to $1,500 per person for funds that have been set aside and designated for the burial expenses of:

  • an applicant or recipient;
  • an applicant's or recipient's eligible or ineligible spouse; or
  • the parent or parent's spouse when resources are deemed to a minor child (see Section F-1420, Deeming for Children).

Reductions in Maximum Exclusion

The burial fund exclusion allows a person to designate up to $1,500 of various kinds of resources as burial funds. The burial fund exclusion works in conjunction with the life insurance exclusion described in Section F-4223, Life Insurance, because the $1,500 set aside for burial must be reduced by the face value (FV) of:

  • any life insurance policy that is already being excluded by the life insurance exclusion (see Section F-4223);
  • any burial insurance policy for the burial expenses of the individual (see Section F-4226, Term and Burial Insurance);
  • any amount held in an irrevocable trust, burial contract or other irrevocable arrangement for the individual's burial expenses, except to the extent that it represents excludable burial spaces (see Section F-4160, Prepaid Burial Contracts); or
  • any life insurance policy for which a funeral provider has been made the irrevocable beneficiary, if the life insurance policy owner has irrevocably waived his right to, and cannot obtain, any cash surrender value (CSV) the life insurance policy may generate (see Section F-4170, Burial Contracts Funded by Life Insurance, and Section F-4172, Irrevocable Assignment).

To be excluded, the person's funds must be:

  • liquid resources (see below),
  • separately identifiable and not combined with other funds, and
  • specifically designated for burial expenses.

How a Designation May Be Made

Burial funds may be designated as such by:

  • an indication on the burial fund document (for example, the title on a bank account); or
  • a signed statement.

Signed Statement Designating Burial Funds

A signed statement designating resources as set aside for burial must show the:

  • value and owner of the resources;
  • person for whose burial the resources are set aside;
  • form(s) in which the resources are held (for example, burial contract, bank account, etc.); and
  • date the individual first considered the funds set aside for the burial of the person specified.

Use Form H1252, Designation of Burial Funds, for resources owned by the applicant, recipient or spouse (or parent in a minor child deeming budget) for a signed statement of designation.

Date of Intent

Accept the person's allegation as to the date the person first considered the funds set aside for burial (even prior to application) unless there is evidence that the funds were used and replaced after that date.

Effective Date of Exclusion

Once the date that burial funds were considered set aside for burial has been established, the first month for which the exclusion affects the first-of-the-month resources determination is the latest of:

  • the month following the month in which the funds were considered to have been set aside, subject to the rules of administrative finality; or
  • the actual or effective month of filing if the funds were considered set aside before that month.

Note: The "separately identifiable" criteria above must be met before burial funds can be excluded. If the requirement is not met as of 12:01 a.m. on the first day of the "test" month, the exclusion cannot apply until the following month, even if the funds were considered as set aside for burial prior to the "test" month (see Section F-4227.3, Effective Date of Designation).

Designating Life Insurance as a Burial Fund

When designating a countable life insurance policy as a burial fund, the individual typically designates the policy itself rather than the CSV. This is the case because the CSV of a policy is payable only during the lifetime of the individual and thus cannot be used to bury the individual. However, since the CSV is the current resource value of the policy, it is the CSV which is applied toward the burial fund limit when determining countable resources.

When designating life insurance as a burial fund, the individual can also designate any dividend accumulations on the life insurance policy (see Section F-4224.1, Dividend Additions and Accumulations) as a burial fund. Dividend accumulations are a separate resource (that is, not considered as an increase in the value of the CSV) and must be designated as burial funds separate from the life insurance policy itself.

Note: A verbal designation is acceptable when the applicant/recipient or authorized representative is designating life insurance insuring the applicant/recipient (or spouse) and the case is due. A follow-up with a written statement from the recipient/authorized representative is required to continue the burial fund designation. The case also must reflect a special review to follow up for the written statement of designation.

Written documentation of the verbal statement from the applicant/recipient or authorized representative must contain the same information requested on Form H1252 for life insurance designation and must be in the case record documentation.

Burial Funds

Burial funds are:

  • revocable burial contracts;
  • revocable burial trusts;
  • other revocable burial arrangements (including the value of certain installment sales contracts for burial spaces);
  • cash;
  • financial accounts (for example, savings or checking accounts); or
  • other financial instruments with a definite cash value (for example, stocks, bonds, certificates of deposit and life insurance, including the cash value of life insurance the person owns on someone else).

These funds must be clearly designated for the person's or spouse's burial, cremation or other burial-related expenses. Property other than that listed in this section is not considered burial funds and may not be excluded under the burial funds provision. For example, a car, real property, livestock, etc., are not burial funds.

Expenses for Burial Funds Exclusion Purposes

Expenses Included — Generally, expenses related to preparing a body for burial and any services prior to burial. Examples: transportation of the body, embalming, cremation, flowers, clothing, services of the funeral director and staff, etc.

Expenses Not Included — Usually, expenses for items used for interment of the deceased's remains. Such items may be subject to the burial space exclusion (see Section F-4214, Burial Spaces). However, items that do not qualify for the burial space exclusion (for example, a space being purchased by installment contract) may be excluded under the burial fund exclusion.

Originally Designated Amount

The originally designated amount of a burial fund is the amount set aside for burial, including excluded and non-excluded funds, but exclusive of interest and appreciation at the time of the most recent designation. Any amount can be designated for burial, but only the amount established in Section F-4228, Burial Fund Calculation, Step 3, can be excluded.

Note: The person or his authorized representative meets requirements for excluding burial funds by:

  • including a specific statement about the designation on a financial institution's records or on other ownership documents, or
  • providing a written statement (or Form H1252) that the resource is designated for burial expenses. The person or his authorized representative must include in this statement the following information:
    • Type of resource set aside and designated
    • Name of the financial institution or company
    • Account or policy number
    • Amount of money in or value of the resource
    • Effective date of designation

Use Form H1276, Burial Fund Designation Worksheet, which provides a step-by-step worksheet for calculating the amount of excluded burial funds.

 

F-4227.1 Calculation of Available Burial Fund Exclusion

Revision 10-4; Effective December 1, 2010

 

From the $1,500-per person (for the person, spouse or deemor) allowance for burial fund exclusions:

  1. deduct irrevocable arrangements owned by the person or someone else (for the person, spouse or deemor). This includes a revocable/irrevocable burial contract for the person's burial purchased by someone other than the person, including the spouse after the initial eligibility period in spousal cases (see Section F-4160, Prepaid Burial Contracts, Section F-4170, Burial Contracts Funded by Life Insurance, and Section F-4172, Irrevocable Assignment);

    Note: Burial insurance policies, generally ranging from $100 to $200, were issued by some funeral homes before 1965. These policies are not countable resources. However, they are considered irrevocable burial arrangements, which reduce the $1,500 maximum burial fund exclusion. If the policies have been purchased by life insurance companies and converted to term life insurance, they are treated as any other term life policy (see Section F-4226, Term and Burial Insurance).
  2. deduct the face value of excluded life insurance on the individual (see Section F-4223, Life Insurance); and
  3. use the remaining amount to reduce the countable amount of any liquid resource (see Section F-4100, Types of Liquid Resources) designated by the person (see Section F-4227.2, Opportunity to Designate).

Note: If the amount of the burial exclusion reduces the total countable resource amount below the resource limit, the person is resource eligible. If the amount of the exclusion is insufficient, the person is not eligible. If joint funds are being designated for more than one individual, calculate each individual's designation separately. For example, a couple with a $1,000 joint savings account could designate $500 for each spouse or $750 for one spouse and $250 for the other. Their statement of designation or Form H1252, Designation of Burial Funds, must be specific.

An exclusion of burial funds does not continue from one period of eligibility to another across a period of ineligibility. If a person reapplies after he has been denied, and there is a break in coverage, HHSC applies the burial fund exclusion as if it had never existed before. The exclusion is subject to the $1,500 maximum and the provisions of this item.

If a person designates a whole life policy (or policies) for burial expenses, he must designate the total cash value of each policy.

If an ineligible spouse/parent has designated funds for burial and then applies for benefits, it is not necessary to redesignate fund for burial.

 

F-4227.2 Opportunity to Designate

Revision 09-4; Effective December 1, 2009

 

If a person's resources exceed program limits, HHSC does not deny the case before determining if excess resources can be designated as burial funds and allowing the person the opportunity to do so. Use Form H1277, Notice of Opportunity to Designate Funds for Burial. A person may designate funds for burial at any time, not just at the point of ineligibility.

 

F-4227.3 Effective Date of Designation

Revision 10-3; Effective September 1, 2010

 

HHSC accepts the person's statement about the date he considered the funds set aside for burial, unless there is evidence of tampering. The effective date of designation can be retroactive to the month of application, or prior months, if all criteria for designation are met at that time. Once designated, the funds remain burial funds until eligibility terminates or until the funds are tampered with.

When an ineligible spouse/parent has designated funds for burial and then applies for benefits, the following applies:

  • If resources have been deemed to the person from the ineligible spouse/parent, HHSC uses the value of the designated burial funds as of the original designation date.
  • If resources have not been deemed to the person from the ineligible spouse/parent, HHSC uses the value of the designated burial fund as of the ineligible spouse's/parent's medical effective date (MED).

In spousal cases:

  • If the ineligible spouse applies during the initial eligibility period, HHSC uses the value of the designated burial fund as of the original designation date.
  • If the ineligible spouse applies after the initial eligibility period, HHSC uses the value of the designated burial fund as of the ineligible spouse's MED.

Notes:

  • The 12:01 a.m. rule applies to the assessment of all resources. Use the value of the designated burial funds as of 12:01 a.m. for the month of the medical effective date in the calculation.
  • The burial fund exclusion is only allowable for the person, the person's spouse (eligible or ineligible) or the parents of the person when the person is a minor child and deeming occurs.
  • The burial fund exclusion is not allowed for the person's minor or adult children or any other individual. If the person purchases an asset that is a burial fund for a minor child or an adult child who is not disabled, treat as a transfer of assets. Deduct the value of the burial space items before calculating the penalty. If the person's child meets Social Security Administration disability criteria, regardless of age, treat as an exception to transfer.

 

F-4228 Burial Fund Calculation

Revision 10-4; Effective December 1, 2010

 

Procedure

Based on policy in Section F-4227, Burial Funds, Section F-4227.1, Calculation of Available Burial Fund Exclusion, Section F-4227.2, Opportunity to Designate, and Section F-4227.3, Effective Date of Designation, use the following for determination of the burial fund calculation.

 

Step Procedure
1 Subtract from the $1,500 maximum burial fund exclusion the value of any irrevocable burial arrangement (for example, trust, contract, burial insurance) on the person whether the person owns it or not.
2 Also subtract from the $1,500-maximum burial fund exclusion the total face value of all excluded whole life insurance policies owned by the person.
3 The amount remaining is the amount available for burial fund exclusion.
4 Subtract the amount in Step 3 from the amount of burial funds designated by the person.
5 The remainder is a countable resource. If the remainder is a negative number, that amount can be designated as burial funds at a later date.

Examples:

  • As of 12:01 a.m. on January 1 of this year, Carol Caswell owned the following resources:

    $2,200 – Savings account
    $1,200 – Cash value of a whole life insurance policy with a face value of $1,700
  • The full $1,500 burial fund designation exclusion was available for designation.
  • Ms. Caswell designated the cash value of the life insurance policy for burial effective 12:01 a.m. on January 1 of this year, but did not wish to designate the total savings account for burial. Therefore, she was ineligible January of this year.
  • On January 1 of this year, Ms. Caswell withdrew $500 from her savings account and deposited the $500 into another savings account designated for burial. She provided a statement on Form H1252, Designation of Burial Funds, indicating that this account was designated for burial effective January 25 of this year. Funds that were not separately identifiable on the date of application but are subsequently separated and designated for burial are excluded effective at 12:01 a.m. of the first day of the following month.

 

Amount Description

$ 1,500

Maximum allowable designation

– 1,200

Cash value of designated whole life insurance policy

$ 300

Remaining available for burial fund designation

$ 500

Savings account designated for burial

$ 300

Available for burial fund designation

$ 200

Counted toward resource limit

$ 200

Countable value of designated savings account

+ 1,700

Original savings account

$ 1,900

Total Countable Resources as of 12:01 a.m. on February 1 of this year.

  • The person has two life insurance policies with a total face value of $7,000 and total cash value of $1,100. The person also has an irrevocable, fully-paid burial arrangement which is owned by the community spouse. The face value is $3,770, which reduces the $1,500 burial fund designation dollar for dollar. Therefore, the $1,100 cash value of the life insurance is a countable resource.

 

F-4229 Annual Burial Fund Calculation

Revision 09-4; Effective December 1, 2009

 

HHSC excludes from income and resource determinations interest that accumulates and becomes a part of excludable burial funds or appreciation in the value of an excludable burial fund. Interest/appreciation on excluded burial funds is not included in determining if the $1,500-maximum has been reached. Also excluded is the increased cash value of life insurance policies excluded under this policy, but payments made on a prepaid burial contact that increases the value of the contract are not excluded as appreciation.

 

F-4229.1 Designated Amount is Less Than $1,500

Revision 09-4; Effective December 1, 2009

 

Example: The person became eligible in May 1988 with an original balance of $1,000 in the excluded burial fund account. The current balance is $1,166.40 in the designated savings account. The person now wants to increase the excludable burial fund balance by adding more money to this account. The person is not covered by any irrevocable trust and does not have any excluded whole life insurance. The person can add $500 to the burial fund without affecting resources. The $166.40 should be excluded as a resource. Any interest earned on this burial fund account is excluded.

 

F-4229.2 Designated Amount Exceeds $1,500

Revision 10-3; Effective September 1, 2010

 

If a designated resource exceeded $1,500 at the initial designation and that resource has increased in value at the next annual review from accrued interest, dividends or inflation, calculate the countable amount of the burial fund as follows:

  1. Determine the percentage of total funds that were countable at the prior designation by dividing the countable amount of the designated resource by the total value of the designated resource.
  2. Apply that percentage to the current total value of the designated resource. If a decimal number is used rather than a percent, take the decimal to three places. For example, 25.5 percent would be .255 in a decimal number.

At the next annual review (if designated funds increase in value again), multiply the total value at the review by the percent determined at the initial designation. The percentage used at each review remains the same unless major changes, such as tampering to the fund, occur.

Example: At the initial application, the person designated a $2,000 savings account for burial:

Amount Description
$2,000 Savings designated for burial
–1,500 Designated burial fund allowance
$ 500 Countable resource

$500 ÷ $2,000 = 25% countable of the designated resource

At the annual review the following year:

Amount Description
$2,100 Balance of designated savings (earned $100 in interest the first year)
× .250 Countable of the designated resource
$ 525 Total countable resources of the savings account

Twenty-five percent of the total interest earned is considered for income in the eligibility and co-payment budgets.

At the annual review the following year:

Amount Description
Amount Description
$ 2,225 Balance of designated savings (earned $100 in interest the first year and $125 the second year)
× .250 Twenty-five percent of the total interest earned
$556.25 Total countable resources of the savings account

Twenty-five percent of the total interest earned is considered for income in the eligibility and co-payment budgets.

 

F-4229.3 Increased Value from Person Action

Revision 09-4; Effective December 1, 2009

 

If the value of a resource previously excluded under burial designation fund exclusion was less than or equal to the allowable $1,500 at the time of designation, and the amount designated increased because of person action, such as additional payments, the increased amount which exceeds $1,500 is a countable resource.

If the amount designated exceeded $1,500 and increased in value due to person action, such as making monthly payments on a prepaid burial contract, the amount in excess of $1,500 is a countable resource.

 

F-4229.4 Increased Value from Person Action and Interest/Dividends

Revision 09-4; Effective December 1, 2009

 

HHSC excludes from income and resource determinations interest that accumulates and becomes part of excludable burial funds.

If the amount designated for burial funds increased to over $1,500 because of person action plus accrued interest, dividends or inflation, HHSC must first determine the date of the additional payment and the date interest or dividends were paid.

If the person made the additional payment before the interest was paid, determine the countable amount using the following steps:

  1. Add the amount of the additional payment to the amount that was countable at the prior designation.
  2. Divide this total by the value of the designated account after the additional payment was made (before the interest was paid). This yields the percentage of the fund that is now countable.
  3. Multiply the current value of the designated fund (including interest) by the percentage from #2. This yields the countable value of the fund.

At the next review, if additional payments are made before interest is paid, the percentage changes again. Therefore, repeat the steps.

Example: At the initial application, Bill Brooks designated a $2,000 savings account for his burial. $1,500 (or 75.0%) was excluded and $500 (or 25.0%) was countable.

At the annual review, the savings account record shows:

Amount Description
$ 2,000 Previous balance 12/31
100 Additional payment on 1/5
25 Interest on 3/1
25 Interest on 6/1
25 Interest on 9/1
25 Interest on 12/1
$ 2,200 Current value of account

Determine the countable value using the following steps:

Step 1.

Amount Description
$ 500 Countable at prior designation
+ 100 Additional payment
$ 600 Total

Step 2.

$600 + $2,100 (value after payment, but before interest) = .286 or 28.6%

Step 3.

Amount Description
$ 2,200 Current value of account
× .286 Percentage countable
$ 629.20 Countable resource of the designated savings account

If the person made the additional payment after the interest was paid:

  1. Multiply the value of the resource after interest paid (before additional deposits) by the percent counted as determined at the previous designation. This yields the countable portion of the resource before the additional payments.
  2. Add to the above figure the amount of the additional payments. The sum is the total countable resource value of the fund. Divide the countable amount by the total amount of the fund to determine the percentage to carry over to the next review.

At the next review, if additional payments are made after interest was paid, repeat the steps.

Example: At the initial application, Tom Taylor designated a $2,000 savings account for his burial. $1,500 (or 75.0%) was excluded and $500 (or 25.0%) was countable.

At the annual review, the savings account record shows the following:

Amount Description
$ 2,000 Previous balance 12/31
100 Additional payment on 1/5
25 Interest on 3/1
25 Interest on 6/1
25 Interest on 9/1
25 Interest on 12/1
100 Additional payment on 12/5
$ 2,200 Current value of account

The eligibility specialist determined the countable value using the following steps:

Step 1:

Amount Description
$2,000 Balance on savings
+ 100 Interest payments
$2,100 Total Savings
×. 250 % previously determined
$ 525 Countable portion of the resource prior to additional payments

Step 2.

Amount Description
$ 525 Countable portion of the resource prior to additional payments (total from Step 1)
+ 100 Additional Payment
$ 625 Countable resource value

Step 3.

Amount Description
$625 Countable resource value (from Step 2)
+ $2,200 Current value of account
.284 or 28.4% Total

F-4230 Treatment of Burial Fund Tampering

Revision 09-4; Effective December 1, 2009

 

If a person designates funds for burial, he is establishing that the funds will not be used for any other purpose. Therefore, if the designated funds are used for purposes other than the person's burial, they are really not designated for burial. The asset becomes a countable resource as of 12:01 a.m. of the first day of the month following the month the funds were used for other purposes.

HHSC does not consider that a person tampered with burial funds if he:

  • adds funds to a resource that is designated for burial, or
  • converts the total amount in a designated burial fund to another designated burial fund (for example, the person uses a savings account designated for burial expenses to purchase a prepaid funeral contract).

If funds are tampered with, they may be redesignated. Request restitution for months in which the designation was broken and the person's resources exceeded the appropriate resource limit. Redesignating may mean a different amount in the designated burial fund and possibly a new percentage of exclusion. It always means a new effective date of the designation.

 

F-4240 Safe Deposit Box

Revision 09-4; Effective December 1, 2009

 

If a person's application or redetermination form shows that he has a safe deposit box, ask him about its contents. If the contents indicate ownership of resources, refer to the appropriate handbook sections for handling these resources.

The following information must be included in the case record documentation:

  • location of safe deposit box, and
  • inventory of contents.

Sources of verification include:

  • contact with financial institution, and
  • statement by person or responsible person.

 

F-4250 Livestock

Revision 09-4; Effective December 1, 2009

 

Livestock maintained as part of a trade or business or exclusively for home consumption is not counted; otherwise, the livestock's current market value is a countable resource.

If the livestock meets the equity value and rate of return criteria for nonbusiness property, the livestock used to produce income may also be excluded.

If animals are maintained as part of a trade or business or exclusively for home consumption, do not verify the value. If the person's statement appears to be reasonable and the actual value could not affect eligibility, verification is also unnecessary. In all other cases, verify the current market value for the number and kind of animals reported.

The following information must be included in the case record documentation:

  • kind and number of animals owned by person;
  • whether animals are excluded as a resource;
  • reason for exclusion, if excluded;
  • current market value, if countable; and
  • source of information or verification.

Sources of verification include:

  • local knowledgeable source (for example, auction barn employee); and
  • newspaper.

 

F-4260 Nonliquid Resources Converted to Cash

Revision 09-4; Effective December 1, 2009

 

See Section F-1260, Conversion of Resources.

If a person converts nonliquid resources to cash, subtract expenses from the gross amount for which the person sold the resource and count the net value of resources resulting from the sale. Examples of expenses are cost of advertising, legal fees and cost of repairs to make the resource salable.

Determine the type of resource sold and whether the person received the current market value. If he did not, use the transfer-of-resources policy.

Determine whether the person is eligible based on his total countable resources, including the net amount received from the sale.

If two or more resources are sold and the person incurs a loss in the sale of one of them, the person may not use this loss to lower the net proceeds from the sale of the other resources(s).

If the net value of all countable resources exceeds the applicable resource limitation, the person is not eligible unless the property can be excluded for another reason.

See Chapter J, Spousal Impoverishment; Section F-2000, Resource Exclusions – Limited and Related to Exempt Income; Section F-3000, Home; and Section F-5000, Potential Resource Exclusions.

If a person converts nonliquid resources to cash, subtract expenses from the gross amount for which the person sold the resource and count the net value of resources resulting from the sale. Examples of expenses are cost of advertising, legal fees and cost of repairs to make the resource salable.

Determine the type of resource sold and whether the person received the current market value. If he did not, use the transfer-of-resources policy.

Determine whether the person is eligible based on his total countable resources, including the net amount received from the sale.

Verify and document the gross amount that the person received from the sale of his resources and any expenses relating to the sale. Also verify the current market value of the resource.

Sources for verifying the amount received from the sale of a resource are:

  • sales receipt or contract,
  • note, and
  • bank deposit slip.

Sources for verifying expenses related to the sale of a resource are:

  • bill for repairs or services, and
  • copy of a lien or note that had to be paid to effect the sale. The copy should show final settlement.

Sources for verifying the current market value of the resource are:

  • statement from a knowledgeable source, depending on the type of resource;
  • newspaper ads for the sale of similar items; and
  • assessment or tax notices.

 

F-4300 Resources Essential to Self-Support

Revision 09-4; Effective December 1, 2009

 

HHSC may exclude as a resource property essential to self-support, but count the income that the property produces.

Liquid resources do not qualify for exclusion as property essential to self-support unless they represent necessary assets of a trade or business. See Section F-4330, Business Property.

 

F-4310 Nonbusiness Property – $6000/6%

Revision 09-4; Effective December 1, 2009

 

A person (and spouse, if any) is allowed to have nonbusiness property that is producing income necessary to self-support, if the:

  • equity value does not exceed $6,000; and
  • person receives a net annual rate of return of at least 6% of the equity value.

If a person's equity in income-producing nonbusiness property exceeds $6,000, and the property is producing a net annual rate of return of at least 6%, the excess equity value is a countable resource. For example, total equity value minus $6,000 equals the amount to be counted, together with any other resources.

If the net annual rate of return is less than 6% of the equity value, the total equity value is a countable resource.

In some instances, a person may own more than one income-producing nonbusiness property. To be excludable, each property must separately produce a 6% rate of return. A maximum of $6,000 may be excluded from the combined equity value of all properties producing a 6% net annual rate of return. The combined equity value in excess of $6,000 is a resource.

Note: This exclusion does not apply to liquid assets. For example, a note cannot be excluded under the $6,000/6% policy.

Nonbusiness property that is essential to self-support includes, for example, rental property, leased farm property and income-producing mineral rights.

Confirm that the equity value of the resource does not exceed $6,000, and that the resource produces a net annual rate of return of at least 6% of the equity value. In determining equity value, deduct any encumbrances such as mortgages or liens.

Sources for verifying ownership include:

  • copy of the deed,
  • copy of the will, and
  • copy of a current tax statement or assessment.

Sources for verifying income include:

  • lease agreement;
  • rent receipts;
  • bank deposit slips;
  • canceled checks and receipts from expense (to determine net income); and
  • recent income tax return.

Sources for verifying the current market value include:

  • copy of a mortgage or lien,
  • copies of bills for repairs or services, and
  • recent income tax return.

Reference: Verification procedures for mineral rights are explained in Section F-4213, Mineral Rights.

 

F-4311 Examples of $6000/6%

Revision 10-3; Effective September 1, 2010

 

Vernon Underwood owns farmland with a verified equity value of $4,500. Mr. Underwood has leased the land for $800 a year. Because the equity value of the property is less than $6,000, and the net annual rate of return exceeds the required minimum of 6%, Mr. Underwood's farmland is excluded as a resource.

George Best owns three lots, none of which is home property. A billboard company rents the lots from Mr. Best to use for advertising. The verified equity value of the lots and the amounts of rent received are:

Property Equity Value Annual Rent
Lot A $ 800 $ 60
Lot B 600 50
Lot C + 5,000 + 500
Total $ 6,400 $ 610

Although each lot is worth less than $6,000, and each is producing a net annual rate of return of more than 6% of the equity value, the combined value of the three lots exceeds $6,000. Count the excess equity value of $400 as an available resource.

Ruby Markham has mineral rights with a verified equity value of $7,000. Her net annual income from the mineral rights at the time of redetermination was $450. She had no other countable resources.

Amount Description
$7,000 Total equity value
–6,000 Excluded
1,000 Excess equity value
0 Other resources
$1,000 Total countable resources

Ms. Markham remained eligible because she was receiving more than 6% of the equity value of the mineral rights, and the excess equity, combined with any other resources, did not exceed the resource limit.

At a subsequent redetermination, verification received indicated that Ms. Markham's equity in the mineral rights remained at $7,000. The net annual rate of return, however, had changed to $280. An officer of the oil exploration company verified that production would continue to decrease during the next two years. Because the net annual rate of return was less than 6% of the equity value of $7,000, the mineral rights are a countable resource and Ms. Markham is no longer eligible for assistance.

 

F-4312 Rate of Return Less Than Reasonable

Revision 09-4; Effective December 1, 2009

 

A person's non-business property that is valued at $6,000 or less can be excluded even if it produces less than a 6% annual rate of return, if all of the following conditions are met:

  • Unusual or adverse circumstances cause a temporary reduction in the rate of return.
  • The property is used in an income-producing activity.
  • The property usually has net annual rate of return of at least 6% of the equity value of the property.
  • The person expects the property to resume producing a reasonable return within 18 months of the end of the calendar year in which the unusual incident caused the reduction in the rate of return. If, by the end of the time allowed, the property is not producing a net annual rate of return of at least 6% of the equity value, the resource cannot be excluded.

The person must send a convincing written explanation to exclude the property temporarily. Information from other knowledgeable sources may also be appropriate. Supervisory concurrence with the decision is recommended.

If granting an exclusion, review the case at each redetermination and again near the end of the time allowed (18 months from the end of the calendar year of the unusual incident).

Document in the case record the reason for the exclusion. Also show the rate of return that is temporarily being received.

 

F-4320 Employment-Related Personal Property

Revision 09-4; Effective December 1, 2009

 

HHSC excludes personal property that a person uses in connection with his employment. Also excluded is any resource that a person uses exclusively to produce items for home consumption and is a significant factor in his support and maintenance.

Resources used to produce items for home consumption include, but are not limited to:

  • cows supplying milk,
  • chickens supplying eggs, and
  • garden plots for growing vegetables.

At application and at each redetermination, determine whether a resource used for producing items for home consumption is essential to the person's self support. If the resource, or the person's use of it for self-support, is questionable, obtain supervisory concurrence.

On the worksheet, record information about the resource owned and the reason for exclusion or nonexclusion.

 

F-4330 Business Property

 

Revision 09-4; Effective December 1, 2009

 

Property essential to self-support that is used in a person's trade or business is excluded from resources regardless of value or rate of return. Excludable business property is tangible business assets, including, but not limited to, land and buildings, equipment and supplies, inventory, livestock, motor vehicles and all liquid assets needed for the business.

Personal property used in a person's trade or business is also excluded from resources. Excluded personal property includes, but is not limited to, tools, safety equipment and uniforms.

To be considered as an excludable resource, business property (including personal, business-related property) must be in current use in the person's trade, business or employment. If the property is not in current use, HHSC excludes the property only if it has been previously used by the person, and if it is reasonable to expect that it will be used again.

When a person alleges owning trade or business property, determine if a valid trade or business exists and if it is in current use. Obtain the following documentation:

  1. a description of the trade or business,
  2. a description of its assets,
  3. the number of years it has been operating,
  4. the identity of any co-owners, and
  5. the estimated gross and net earnings for the current tax year. Business tax returns (IRS Form 1040 and appropriate schedules) can be used to determine earnings and the validity of the trade or business.

 

F-4400 Plan for Achieving Self-Support (PASS)

Revision 09-4; Effective December 1, 2009

 

If a blind or disabled person has an approved plan for achieving self-support (PASS), the MEPD Policy Section must approve the plan.

If the plan is approved, do not count the resources and income that are essential for accomplishing the objectives of the plan.

A counselor in the state agency for vocational rehabilitation formulates the majority of plans. However, the Veterans Administration, public or private social agencies or groups, anyone assisting the person, or the person himself may formulate plans.

Because an approved PASS is limited in duration, be sure to check the status of the plan at each redetermination and review the case again before the plan's termination date.

Keep in the case record a copy of the PASS. Record in the case record any additional information pertaining to the plan.