Revision 09-4; Effective December 1, 2009

 

Examples in this section may not reflect the most recent amount of the average private-pay cost per day that is used for the transfer of assets divisor.

 

I-6100 Purchase of a Life Estate

Revision 09-4; Effective December 1, 2009

 

 

I-6110 Policy Implementation Dates

Revision 09-4; Effective December 1, 2009

 

For applications or program transfer requests filed before Oct. 1, 2006, or for case actions before Oct. 1, 2006, regardless of the date of purchase of a life estate, follow pre-DRA policy for life estates and remainder interests. Do not consider the purchase of a life estate as a transfer of assets, unless the purchase price of the life estate exceeds the fair market value (FMV) of the life estate.

For applications or program transfer requests filed on or after Oct. 1, 2006, or for case actions on or after Oct. 1, 2006, with a purchase of a life estate before April 1, 2006, follow pre-DRA policy as outlined in Section F-4212, Life Estates and Remainder Interests. Do not consider the purchase of a life estate as a transfer of assets, unless the purchase price of the life estate exceeds the FMV of the life estate.

For applications or program transfer requests filed on or after Oct. 1, 2006, or for case actions on or after Oct. 1, 2006, with a purchase of a life estate on or after April 1, 2006, consider the purchase of a life estate on or after April 1, 2006, as a potential transfer of assets and follow post-DRA policy.

 

I-6120 Post-DRA Transfer of Assets Policy

Revision 09-4; Effective December 1, 2009

 

Note: The post-DRA changes pertaining to a life estate do not apply to the retention or reservation of a life estate by an individual transferring real property.

When an individual purchases a life estate on or after April 1, 2006, the potential for a transfer of assets occurs. A purchase of a life estate on or after April 1, 2006, is a transfer unless both of the following conditions are met:

  • The individual purchasing a life estate in another individual's home actually resides in the home.
  • The individual continues to reside in the home for a period of at least one year after the date of purchase.

 

 

I-6121 One-Year Residency Requirement

Revision 09-4; Effective December 1, 2009

 

The months of residence for the one-year period must be consecutive. Less than one year of occupancy after the date of purchase results in treatment as a transfer of assets for less than fair market value (FMV). When evaluating the facts of the purchase of a life estate, determine whether the individual lived in the home by considering factors, such as whether the individual's mail was delivered there or whether the individual paid the property taxes or utilities.

If the purchaser of the life estate moves out of the home before the end of the one-year period, the date of the purchase of the life estate is the date of transfer and the full amount paid for the life estate is the countable amount of the transfer.

The purchase amount of the life estate should not be reduced or prorated to reflect an individual's residency for a period of time less than a year.

Continue to consider Medicaid resource eligibility and transfer of assets rules, even in a case where an individual purchasing a life estate in the home of another individual does live there for at least one year. Unless the property in which the individual has purchased the life estate qualifies as the individual's excluded home, the value of the life estate is counted as a resource in determining Medicaid eligibility.

In determining the value of life estates, continue to follow policy as life estates and remainder interests and the use of the life estate tables in Appendix X, Life Estate and Remainder Interest Tables. The life estate can be excluded as a homestead.

Under pre-DRA and post-DRA policy, consider as a transfer of assets the purchase for a life estate when the payment for the life estate exceeds the FMV of the life estate.

Use Appendix X to determine the FMV. Calculate the difference between the purchase price paid and the FMV.

If an individual makes a gift or transfer of a life estate interest, the value of the life estate, as calculated under Appendix X, is treated as a transfer of assets.

Example 1

Date of Life Estate Purchase

11/15/2005

Amount of Life Estate Purchase

$7,500 – FMV was paid for the life estate interest.

File Date

01/25/2006

Institution Entry

01/15/2006

Living Arrangement

Individual resided in the home until date of entry to institution, which is less than one year after date of purchase.

MED

01/01/2006

Penalty Start Date

Use pre-DRA policy. No transfer of assets.

Application for Medicaid was before 10/01/2006 and life estate interest was purchased before 04/01/2006.

Use policy in Section F-4212, Life Estates and Remainder Interests.

Example 2

Date of Life Estate Purchase

05/11/2006

Amount of Life Estate Purchase

$5,000 – FMV

File Date

10/15/2006

Institution Entry

08/15/2006

Living Arrangement

The individual resided in the home until entry to the institution, which is less than one year after the date of purchase.

MED

10/01/2006

Penalty Start Date

Use post-DRA policy. Start penalty with the medical effective date month — 10/01/2006. A transfer penalty applies to this situation since the individual did not reside in the home with the purchased life estate for one year after date of purchase.

Purchase amount is $5,000 ÷ 117.08 = 42 days. Penalty start date is 10/01/2006 through 11/11/2006.

Example 3

Date of Life Estate Purchase

05/15/2006

Amount of Life Estate Purchase

$6,000 – FMV

File Date

12/11/2007

Institution Entry

12/11/2007

Living Arrangement

The individual resided in the home until date of entry to institution, which is greater than one year.

Medical Effective Date

12/01/2007

Penalty Start Date

Use post-DRA policy. No transfer penalty applies to this situation since the individual resided in the home for more than one year after date of purchase.

Use policy in Section F-4212, Life Estates and Remainder Interests, for resource treatment of the life estate.

Example 4

Date of Life Estate Purchase

05/11/2006

Amount of Life Estate Purchase

$3,500 – FMV is $2,000.

File Date

06/06/2007

Institution Entry

06/06/2007

Living Arrangement

The individual resided in the home until date of entry to the institution, which is greater than one year.

Medical Effective Date

06/01/2007

Penalty Start Date

Using post-DRA policy, no transfer penalty applies to the purchase of the life estate since the individual resided in the home for more than one year after date of purchase, except that the individual paid more than FMV for the purchase of the life estate.

Difference between FMV of $2,000 and amount paid is $1,500 ÷ 117.08 = 12 days.

Penalty start date policy — Use post-DRA since the transfer was after 02/08/2006 and application was after 10/01/2006.

Penalty starts the medical effective date month of 06/01/2007. Penalty would be from 06/01/2007 through 06/12/2007.

 

I-6200 Purchase of a Promissory Note, Loan or Mortgage

Revision 09-4; Effective December 1, 2009

 

 

I-6210 Policy Implementation Dates

Revision 09-4; Effective December 1, 2009

 

For applications or program transfer requests filed before Oct. 1, 2006, or for case actions before Oct. 1, 2006, regardless of the date of purchase of a promissory note, loan or mortgage, follow policy for promissory notes, loans and property agreements.

Do not consider the purchase of a promissory note, loan or mortgage as a transfer of assets, unless the transaction of the promissory note, loan or mortgage is considered a transfer of assets for less than fair market value (FMV).

For applications or program transfer requests filed on or after Oct. 1, 2006, or for case actions on or after Oct. 1, 2006, with a purchase of a promissory note, loan or mortgage before April 1, 2006, follow policy outlined in Section F-4150, Promissory Notes, Loans and Property Agreements. Do not consider the purchase of a promissory note, loan or mortgage as a transfer of assets, unless the transaction of the promissory note, loan or mortgage is considered a transfer of assets for less than FMV.

For applications or program transfer requests filed on or after Oct. 1, 2006, or for case actions on or after Oct. 1, 2006, with a purchase of a promissory note, loan or mortgage on or after April 1, 2006, consider the purchase of these on or after April 1, 2006, as a potential transfer of assets.

 

I-6220 Post-DRA Transfer of Assets Policy

Revision 09-4; Effective December 1, 2009

 

When an individual purchases a promissory note, loan or mortgage on or after April 1, 2006, the potential for a transfer of assets occurs. A purchase of a promissory note, loan or mortgage on or after April 1, 2006, is a transfer unless all of the following conditions are met:

  • The repayment term must be actuarially sound.
  • Payments must be made in equal amounts during the term of the loan with no deferral of payments and no balloon payments.
  • The promissory note, loan or mortgage must prohibit the cancellation of the balance upon the death of the lender.

If a promissory note, loan or mortgage does not satisfy these three requirements, the countable value considered for transfer of assets is the outstanding balance due as of the date of the individual's application for Medicaid or, for an existing Medicaid recipient, the program transfer request date.

To determine if actuarially sound, use life expectancy tables by accessing the online actuarial publication from the Social Security Administration’s Period Life Table.

If a promissory note, loan or mortgage is not a transfer, consider Medicaid resource eligibility and transfer of assets policy for persons purchasing a promissory note, loan or mortgage. Section F-4150, Promissory Notes, Loans and Property Agreements, also indicates that if the purchase of the promissory note, loan or mortgage was for less than the FMV, a transfer of assets transaction occurs.