When a claimant or the spouse with whom the claimant lives owns real property that is not furnishing shelter for the claimant, spouse, or their dependent child, consider the property an available resource, which makes the claimant ineligible for assistance on the basis of need (for exceptions, see the policy governing institutionalized spouses with a spouse in the community). The following provisions apply:
- For real property in which the claimant has lived:
- Consider real property as available if twenty-four (24) months have elapsed since the last date on which either the claimant or spouse occupied the dwelling. Apply this provision when the claimant leaves the home to reside in a residential care facility I (RCF-I), senior citizen housing, or other living arrangement except as noted in item 2) below.
- The twenty-four (24) month rule does not apply to real property owned by a claimant and/or spouse who is a patient in a residential care facility II (RCF-II), nursing facility (NF), state hospital, or medical institution. Exclude the value of the property when determining eligibility based on available resources during the period of time the claimant is confined to the nursing home or institution.
NOTE: Exclude the value of the property as available resource when determining eligibility only when the patient goes directly from the home to the nursing facility or other institution or from the home to a hospital and to the nursing facility. Apply the 24-month provision if the patient leaves the home for another living arrangement (child’s home, RCF-I, senior citizen housing, etc.) and then enters the nursing or medical facility. If the patient enters the nursing facility or other institution during 24-month period, the home remains exempt.
- If a claimant or couple owns two pieces of property, the property that is the principal place of residence is exempt as the homestead. Consider the other an available resource. Also, when two claimants marry and each owns a home in which he or she has been living, the property that is the principal place of residence is exempt as the homestead. Consider the other an available resource.
- For town or city property, consider adjoining lots on which there is no dwelling as part of the home, regardless of the number of lots so long as they abut and are in the same city block.
- For rural property, consider acreage on which the home is located plus adjoining acreage that makes up the farming unit a part of the home. Consider property as adjoining even though a road may separate two tracts, if the property is farmed as a single unit.
For QMB, SLMB and QDWI if a non-institutionalized claimant expresses the intent to return to the principle place of residence at any time, do not consider the property an available resource at the expiration of the 24-month period. It the claimant does not intend to return to the property, consider the property available at the end of the 24-month period.
- For real property used in the course of a participant’s trade, business or employment, exclude the entire value of the property:
EXAMPLE: Mr. Lee is a cattle farmer. He owns 10 acres of land not adjoining the homestead. The cattle feed on the 10 acres. The 10 acres are exempt as they are being used directly by the claimant in the course of his business.
EXAMPLE: Ms. Alice is part owner of a flower shop she started 40 years ago. As part of the business, she owns a 100 acre parcel for growing plants and another, non-adjacent property upon which the flower shop sits. Ms. Alice now resides in a nursing home and does not work directly in the flower shop or on the land. She still owns the real properties for the business and receives income from the business as part owner of the flower shop. The land and the flower shop are excluded resources.
EXAMPLE: Mr. Stevens moved from his home to an apartment. He rents this home to his nephew, Alan for $300 per month. A few months after moving in, Alan starts a lawn care business out of the garage. Alan continues to pay rent of $300 per month and Mr. Stevens is not involved in and does not receive income from Alan’s business. Because Mr. Stevens is not involved in Alan’s business or trade, this property is treated as rental property to Mr. Stevens.
EXAMPLE: Ms. Oliver was married to Mr. Oliver and they owned a farming business with two properties: their home with adjacent farmland and another separate parcel with equipment storage and additional farmland. Although Ms. Oliver was part-owner, she did not take part in the running of the business. The business later became an LLC and ownership included their sons, Phil and Dave who helped run the business and work the land. The land, both properties, was still owned by Mr. and Ms. Oliver, but was now rented by the farming business LLC. Mr. Oliver passed away leaving Ms. Oliver, Phil and Dave as the remaining business owners.
Ms. Oliver receives rent from the LLC for the land that the business uses. She is also receives proceeds from the farming business even though she is in a nursing home. Because her property is being used for her business, the rental income is countable unearned income, but the land she rents out is not countable toward the resource limit because it is used as part of her business or trade.
NOTE: Do not consider owning or managing rental property as a business or employment for this purpose unless the property is held and managed by the business.
EXAMPLE: Ms. Sybil manages two homes, 3 duplexes, and an apartment building. All of these properties are held and managed by Sybil Properties Limited which she co-owns with her two daughters. These properties are not countable resources as they are owned by the business.
- For non-business, income producing real property:
The value of a non-business, income producing real property, such as rental property, may be excluded if the property produces a net annual return equal to at least 6% of the equity value (equity value * 6%). Equity value is the current market value minus the debt against the property, such as a mortgage. If a participant owns property outright, the equity value equals the current market value because the participant has 100% equity in the property. For information on equity, refer to section 1030.010.25 Determination of Equity in Real Property.
EXAMPLE: Ms. Ellis lives in an apartment and rents out her former home to her niece. The home has an estimated equity value of $10,000. If the property yields a 6% return ($600.00 annually), the equity is not included as a countable resource.
If the non-business property produces less than a 6% return, the exclusion can apply only if:
- the lower return is for reasons beyond the individual’s control (e.g., crop failure or illness); and
- there is a reasonable expectation that the property will again produce a 6% return
Otherwise, all of the equity value is counted towards the resource limit.
If an individual owns more than one piece of non-business, income producing property, the 6% return requirement applies individually to each:
EXAMPLE: Mr. Grimes owns a fishing cabin (not his residence) that has a current market value and equity value of $3,000. He owns other property that has a current market value and equity value of $2,000. The fishing cabin produces a net annual rental income of $750, and the other property produces less than $50 a year. A 6% annual return on the fishing cabin would be $180 ($3,000 * 6%). Since the fishing cabin produces more than a 6% return, its equity value is excluded. A 6% annual return on the other property would be $120 ($2,000 * 6%). Since the other property produces less than a 6% return, its equity value is not excluded.
EXAMPLE (if the resource limit is $6,000): Mr. and Mrs. Avon, apply for coverage in March 2018 based on OAA criteria. They have $1,000 in a savings account and $500 in a checking account for a total of $1,500 in liquid resources. They also own real property (not their primary residence) with a current equity value of $5,000, which would cause their total resources to exceed the $6,000 limit.
However, they are renting this property to a family friend who is paying $30 per month to store her RV. A 6% annual return would be $300 ($5,000 * 6%). The Avons receive $360 annually, therefore, the equity value of this resource is excluded.
- For non-business real property used to produce goods or services essential solely for participant’s daily activities:
The equity value of non-business property used to produce goods or services essential to self-support is excluded as a countable resource. The property must be in current use or, if it is not in use for reasons beyond the individual’s control, there must be a reasonable expectation that the required use will resume.
Nonbusiness property essential to self-support can be real or personal property if, for example, it is used to:
- grow produce or livestock solely for personal consumption in the individual’s household; or
- perform activities essential to the production of food solely for home consumption.
Unless questionable, accept a statement from the participant which gives:
- a description of the property
- how the property is used; and
- the property’s current market value
EXAMPLE: Ms. Lane owns a home that she resides in and a separate garden plot with a chicken coop across town. Ms. Lane states that the fruit, vegetables and eggs produced on the garden plot are for her own use. The current market value and equity value of the property is $8,500. Her statement is not questionable. Therefore, the property value is excluded from the countable resources.
- For all real property:
Exclude the value of the equity in a life estate in determining eligibility based on available resources.