17.4 Exceptions

A divestment that occurred in the look-back period or any time after does not affect eligibility if any of the following exceptions apply:

The person who divested shows that the divestment was not made with the intent of receiving Medicaid.

The person must present evidence that shows the specific purpose and reason for making the transfer, and establish that the resource was transferred for a purpose other than to qualify for Medicaid. Verbal assurances that he or she was not trying to become financially eligible for Medicaid are not sufficient. Take into consideration statements from physicians, insurance agents, insurance documents, and bank records that confirm the person's statements.

Any of the following circumstances are sufficient to establish that the applicant / member transferred resources without an intent to qualify for Medicaid.

The applicant/member had made arrangements to provide for his or her long term care needs by having sufficient financial resources and/or long term care insurance to pay for long term care services for at least a five-year period at the time of the transfer.

An exception to this requirement is allowed if the individual had a life expectancy of less than five years at the time of transfer. If the individual’s life expectancy was less than five years at the time of the transfer, a divestment penalty is not applied if resources and/or insurance were sufficient to pay for his or her long term care services for his or her remaining life expectancy.

To measure "sufficient resources," use the average monthly nursing home cost of care in effect at the time of the divestment multiplied by 60. Compare that number to the income, assets, and insurance held by the individual at the time of the divestment, or

Taking into consideration the individual’s health and age at the time of the transfer, there was no expectation of long-term care services being needed for the next five years. For example, someone who was gainfully employed and 50 years old at the time of the divestment is not expected to have set aside sufficient resources for five years of long-term care, or

If an individual or couple had a pattern of charitable gifting or gifting to family members (i.e., birthdays, graduations, weddings, etc.) prior to the look-back period, similar transfers during the look-back period would not be considered to have been given with the intent to divest as long as the total yearly gifts did not exceed 15 percent of the individual’s or couple’s annual gross income. If the yearly gifted amount exceeds 15 percent of the individual’s or couple’s annual gross income, and/or there is a gap in the years the gifts occurred, the total amounts gifted for the years in the look-back period shall be considered divestment. This exception is not limited to gifts made on traditional gift-giving occasions and does not preclude a pattern of giving to assist family members with educational or vocational goals, or

Resources spent on the current support of dependent relatives living with the individual are not considered to be divestments. The individual must either claim the relative as a dependent for IRS tax purposes, or otherwise provide more than 50 percent of the cost of care and support for the dependent relative.

This list is not intended to be all inclusive when describing divestments which are permissible because the transfer was made without the intent to qualify for Medicaid. Other situations will arise and in those instances, the person’s "intent” must be evaluated on a case-by-case basis to determine whether or not a divestment occurred. The fact that a person does not meet the criteria for a specific exception does not create a presumption that the person cannot show that the transfer was made for a purpose other than qualification for Medicaid. For example, a person may be able to show that a transfer to a dependent relative not living at home was made for a purpose other than qualifying for Medicaid.

The community spouse divested assets that were part of the community spouse asset share AND this transfer occurred more than five years after the institutionalized spouse was determined eligible:

Five years after the institutionalized person is determined eligible, the community spouse can divest assets that are part of the community spouse asset share (see Section 18.4.3 Calculate the Community Spouse Asset Share). He or she can give them to anyone without affecting the eligibility of the institutionalized spouse.

Example 1: When Ralph went into a nursing home and applied for Medicaid, Edith’s community spouse asset share was $42,000. After Ralph became eligible, Edith gave $30,000 of the community spouse asset share to a favorite nephew. This divestment did not affect Ralph’s eligibility. Edith is allowed to divest all or any part of the community spouse asset share.

1. If the community spouse receives assets from the eligible institutionalized spouse that were not part of the community spouse asset share, he or she cannot give them to anyone except persons listed in Section 17.4 Exceptions, #8. Giving them to someone other than these persons could cause the institutionalized person to become ineligible.

Example 2: Ralph is an institutionalized Medicaid member. He recently inherited $25,000, and immediately transferred it to Edith, his community spouse. This $25,000 is not part of the community spouse asset share. Therefore, Edith cannot transfer the money to anyone except "a child of any age of either spouse who is either blind or permanently and totally disabled or both” (see Section 17.4 Exceptions, #8). If she transfers it to anyone else, Ralph's eligibility for institutional services may be affected.

Homestead property is an exception. After the institutionalized person has become eligible, he or she can transfer the homestead to the community spouse, and the community spouse can transfer it to anyone once five years have passed since the eligibility of the institutionalized spouse. The community spouse’s divestment of homestead property five years after the institutionalized person has become eligible, does not affect the institutionalized person’s eligibility.

Example 3: When Ralph applied for institutional Medicaid, he and Edith owned a home together. Homestead property is not counted as part of the community spouse asset share. After Ralph became eligible, he signed his 1/2 share of the home over to Edith. Edith can divest the part of the homestead that Ralph gave to her without affecting Ralph's eligibility

Note: While these examples show that in some circumstances the community spouse's divestments occurring more than five years after the determination do not affect the institutionalized person's eligibility, they may affect the community spouse's eligibility if he or she later enters an institution and applies for Medicaid.

The ownership of the property is returned to the person in the fiscal group who originally disposed of it.

Division of property as part of a divorce or separation action, and loss of property due to foreclosure or repossession are not divestment.

The person intended to dispose of the asset either at fair market value or other valuable consideration.

Example 5: Gary had a lucky 3-cent postage stamp that he carried in his wallet. A friend admired it, so Gary sold it to him for $0.03, unaware that it was worth more. The friend sold it to a stamp dealer for $7,300. When Gary applies for Medicaid, this divestment will be disregarded.

The agency determines that denial of eligibility would result in undue hardship for the person (see Section 22.4 Undue Hardship).

The institutionalized person or his or her spouse divests homestead property to his or her:

1. Spouse
2. Child who meets at least one of the following conditions/situations:

- Under 21 years of age

- Blind

- Permanently and totally disabled

- Been residing in the institutionalized person's home for at least two years immediately before the person moved to a medical institution, and provided care to him or her which permitted him or her to reside at home rather than in the institution. This care must have been provided for the entire two years immediately before the person moved to a medical institution. Get a notarized statement that the person was able to remain in his or her home because of the care provided by the child.

Note: The statement must be from his or her physician or from someone else who has personal knowledge of his or her living circumstances. A notarized statement from the child does not satisfy these requirements.

1. Sibling who:

- Was residing in the institutionalized person's home for at least one year immediately before the date the person moved to a medical institution.

Verify that the sibling was residing in the institutionalized person's home for at least one year immediately before the person moved to a medical institution. Do not require a specific type of verification. Some examples of verification are written statements from nonrelatives, social services records, tax records, and utility bills with the address and the sibling's name on them.

and

Has a verified equity interest in the home.

"Equity interest" means an ownership interest in a homestead.

Ask to see a copy of the deed or the land contract or some other document to verify the sibling's equity interest in the homestead. Since the sibling's name on the document is not sole proof, you may need to require other documentation such as canceled checks and receipts.

The institutionalized person or his or her community spouse divests a nonhomestead asset or assets to:
1. A spouse
2. A child of any age of either spouse who is either blind or permanently and totally disabled or both.

This page last updated in Release Number: 15-01

Release Date: 06/10/2015

Effective Date: 06/10/2015