Release 19-02

17.2 Divestment Definitions

17.2.1 Divestment

"Divestment" is the transfer of income, non-exempt assets, and homestead property (see Section 17.2.3.1 Homestead Property), which belong to an institutionalized person or his or her spouse or both:

For less than the fair market value of the income or asset by:
1. An institutionalized person, or
2. His or her spouse, or
3. A person, including a court or an administrative body, with legal authority to act in place of or on behalf of the institutionalized person or the person's spouse, or
4. A person, including a court or an administrative body, acting at the direction or upon the request of the institutionalized person or the person's spouse. This includes relatives, friends, volunteers, and authorized representatives.

It is also divestment if a person takes an action to avoid receiving income or assets he or she is entitled to. Actions which would cause income or assets not to be received include:
1. Irrevocably waiving pension income.
2. Disclaiming an inheritance.
3. Not accepting or accessing injury settlements.
4. Diverting tort settlements into a trust or similar device.
5. Refusing to take legal action to obtain a court-ordered payment that is not being paid, such as child support or alimony.
6. Refusing to take action to claim the statutorily required portion of a deceased spouse's or parent's estate.

This includes situations in which the will of the institutionalized person's spouse precludes any inheritance for the institutionalized person. Under Wisconsin law, a person is entitled to a portion of his or her spouse's estate. If the institutionalized person does not contest his or her spouse's will in this instance, the inaction may be divestment.

Count the action as a divestment only if both of the following are true:

- The value of the abandoned portion is clearly identified.
- There is certainty that a legal claim action will be successful. The IM worker must ask the agency’s Corporation Counsel to make this determination.

The purchase of certain types of assets, even at the fair market value , may be considered a divestment, including:
1. The purchase of a life estate interest in another individual’s home on or after January 1, 2009, is a divestment unless the purchaser resides in the home for a period of at least 12 consecutive months after the date of purchase (see Section 17.10.3 Purchase of a Life Estate in the Home of Another Person).
2. The purchase of a promissory note, loan, or mortgage, on or after January 1, 2009 is a divestment unless such note, loan, or mortgage meets several criteria (see Section 17.12.2 Promissory Notes on or after 01/01/09.
3. The purchase of certain annuities may be considered a divestment (see Section 17.11.2 Annuities Purchased On Or After 01/01/09 Or Had Transactions To Them On Or After 01/01/09.

Gambling losses at a casino, racetrack or in some other type of regulated gambling is not divestment. It is divestment if the member makes personal bets with friends or relatives or has losses from unregulated gambling.

17.2.2 Transfer

"Transfer" is the act of changing the legal title or other right of ownership to another person. Converting an asset from one form to another is not divestment. For example, buying a race horse for $12,000 and keeping the race horse is not divestment.

17.2.2.1 Date of Transfer

If the Medicaid member has transferred real property , such as a homestead, the official date of transfer is the date the Quit Claim Deed was signed and notarized. It is not the date the transfer was recorded with the county Register of Deeds.

17.2.3 Nonexempt Assets

"Nonexempt assets" are those that are counted in SSI -related asset tests. Assets that are not counted in these tests are called exempt assets. An available asset (see Section 16.1 Assets Introduction) can be either exempt or nonexempt.

17.2.3.1 Homestead Property

Homestead property, usually an exempt asset, is given special consideration in the Medicaid divestment policy. Homestead divestments are permitted only under the circumstances described in Section 17.4 Exceptions, #7.

17.2.4 Institutionalized Person

See Section 27.4 ILTC Definitions.

17.2.5 Community Spouse

See community spouse in Glossary. A divestment penalty period will be imposed on the Institutionalized Spouse if the Community Spouse divests assets within the first five years after the Institutionalized Spouse has been determined eligible for LTC services (Institutional Medicaid or any of the HCBW programs).

17.2.6 Fair Market Value

"Fair market value" is an estimate of the prevailing price an asset would have had if it had been sold on the open market at the time it was transferred.

17.2.7 Divested Amount

The Divested amount is the net market value minus the value received. To determine the divested amount for a life estate, see Section 17.10 Life Estates.

17.2.8 Net Market Value

"Net market value" is the fair market value at the time of the transfer minus any outstanding loans, mortgages, or other encumbrances on the property.

17.2.9 Value Received

"Value received" is the amount of money or value of any property or services received in return for the person's property. The value received may be in any of the following forms:

Cash.
Other assets as listed in Chapter 16 Assets.
Discharge of a debt.
Prepayment of a bona fide and irrevocable contract such as a mortgage, shelter lease, loan, or prepayment of taxes.
Services which shall be assigned a valuation equal to the cost of purchase on the open market. Assume that services and accommodations provided to each other by family members or other relatives were free of charge, unless there exists a written contract (made prior to the date of transfer) for payment (see Section 17.8 Divesting by Paying Relatives).

17.2.10 Unavailability

If a Medicaid member or his or her spouse uses an asset in a way that makes it unavailable and does not receive FMV , treat that asset as divestment. An example is using an asset as collateral for someone else’s loan.