MEMORANDUM

DISCUSSION:

The Income Maintenance manual sections listed above have been updated to incorporate changes announced in Income Maintenance (IM) Memorandum IM-32 Long-Term Care Eligibility Changes Due to DRA of 2005 dated March 24, 2006 on lengthening of the look-back period to sixty months for all transfers of assets. These manual sections have also been revised to include updated terminology such as changing recipient to applicant/participant, caseworker to eligibility specialist, and defining an improper transfer. Other revisions include clarification of existing processes and policy, such as:

• investigation for possible improper transfer of assets when a transfer of income, non-exempt assets, real property and/or the homestead which belong to an institutionalized person or his/her spouse , or both, for less than fair market value of the income or asset has been made;
• initiation of an inquiry regarding potential improper transfers if any source of information tends to show an improper transfer has occurred;
• appropriate documentation of an improper transfer; and
• addition of IM Manual section 1040.020.40.20 Dispute of Improper Transfer of Assets Penalty.

The Deficit Reduction Act of 2005 Section 6016(c) amended section 1917 (c)(1) of the Social Security Act adding additional rules related to the purchase of promissory notes, loans, or mortgages for individuals receiving MO HealthNet vendor level care and HCB services.

Section 6016(d) of the Deficit Reduction Act of 2005 amended section 1917 (c)(1) of the Social Security Act adding the provision that unless an individual purchasing a life estate in another individual's home actually resides there for a period of at least one year after the date of purchase, the transaction should be treated as a transfer of assets for the purposes of receiving Medicaid vendor level of care services. The amount of the transfer is the entire amount used to purchase the life estate. This provision applies to all life estates purchased in another individual's home on or after February 8, 2006.

IM Manual section 1040.020.30 Determining Fair and Valuable Consideration was revised to incorporate these changes.

Transfer of Assets Policy for Notes, Loans, or Mortgages

Any funds used to purchase a promissory note, loan, or mortgage on or after February 8, 2006 shall result in a transfer of assets unless all of the following criteria 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; and
• The promissory note, loan, or mortgage must prohibit the cancellation of the balance upon the death of the lender.

In determining the amount of the improper transfer of assets, the value of the note, loan, or mortgage, is the outstanding balance due as of the date of the application for MO HealthNet vendor or HCB services.

Purchase of a Life Estate

The purchase of a life estate is considered an improper transfer and results in a transfer of asset penalty unless:

• Payment for the life estate is at or near the fair market value of the life estate as calculated in accordance with the Carlisle Table in Appendix A.

If payment exceeds the fair market value the difference between the amount paid and the fair market value is treated as an improper transfer of assets.

In addition to the requirement that the payment for a life estate be at or near the fair market value, the purchase of a life estate in another individual's home occurring on or after February 8, 2006, results in a transfer of assets penalty unless:

• The individual purchasing a life estate in another individuals' home resides there for a period of at least one year following the date of purchase.

If the individual does not reside there for at least one year following the date of purchase the entire amount used to purchase the life estate is treated as a transfer of assets.

EXAMPLE: Mr. Webster is 72 and lives in his son's home. Mr. Webster purchases a life estate in his son's home for $39,000.00 on December 17, 2006. The value of his son's home is $120,000.00. Using the Carlisle Table the value of the life estate is: $120,000.00 x 6%= $7200.00 x 5.424= $39,052.80. The life estate was purchased at or near fair market value. Mr. Webster enters a nursing facility on January 21, 2007. Mr. Webster purchased the life estate on or after February 8, 2006 and did not reside on the property for at least one year following the purchase of the life estate. Therefore, the entire purchase amount is considered a transfer of assets without fair and valuable consideration. $39,000.00 is used to determine the penalty period.

NECESSARY ACTION:

• Review this memorandum with appropriate staff.
• Apply the policy when investigating transfer(s) of assets at initial application, annual review, and interim contacts.
• Apply the policy to the purchase of any promissory note, loan, or mortgage, or the purchase of a life estate in a home owned by others made on or after February 8, 2006

ER/KSO