Example 1: Marion gave her home to her son John in December 2003. She was 83 at the time.  The FMV of the house at the time of the transfer was $87,000.  Marion retained a life estate.  In March 2006 she applied for Family Care.  Since the transfer of her home occurred in the look back period the worker will have to determine a divestment penalty period.  The divestment amount is the FMV of the house as of December 2003 minus the life estate value.

To determine the life estate value, multiply $87,000 by .38642.  (the number from table 8.1.2 that corresponds to age 83.)

The divested amount is $87,000 - .$33,618.54 = $53, 381.46.  Divide $53,381.46 by the average nursing home cost of care at the time of application, ($5339) to find the number of months she would have been ineligible.  The divestment penalty period is nine months.  She would have been ineligible from December 2003 through August 2004.

Example 2  In January 2007, John sold the home for the current FMV of $102,000 and Marion terminated the life estate.  He took the proceeds from the home and bought another house.  He did not pay Marion for the value of the life estate so a divestment has occurred.  The divestment amount is the life estate value at the time the life estate was terminated.

To determine the life estate value, multiply $102,000 (value of the house at the time the life estate was terminated) by .33764.   ( The number from table 8.1.2 that corresponds to Marion's age, 86, at the time the life estate was terminated.)

$102,000 X .33764 = $ 34,439.28

The divested amount is $34,439.28.  The average nursing home cost of care as of January 2007 was $5584 so Marion's penalty period is six months.  She is ineligible from January 2007 through June 2007.

Since this is an open/ongoing case you have to give timely notice to end her Institutional Medicaid.  If the divestment has been reported timely you would close  her case using adverse action logic.

If the divestment were not reported timely you would have to calculate an overpayment for the months she would have been ineligible if the change would have been reported timely.  (MEH 6.2.2.1)

Example 3:  James sold his home to his son Robert on December 1, 2006.  James was 75 years old and the home was worth $95,000.  Robert paid James $50,000 for the home and James retained a life estate.  The life estate value is $49,541.55 (95,000 X .52149).  Since James received both $50,000 from Robert and retained a life estate worth $49,541.55, the total value he received is more than the FMV of the home.  Because the value he received is greater than the FMV of the home, there is not divestment.

In February 2007, James moved to a CBRF and the home was rented out and James continued to retain the life estate.  The home is not an available asset to James even though he is no longer living in the home.  Because he holds a life estate on the home, James is entitled to any income produced by the property.  The net rent from the home is countable income for James. (MEH 4.2.4 #3)

Example 4: In April of 2001, Greta transferred ownership of her home to her sister Jane and retained a life estate.  Greta applied for and was found eligible for FC October 1, 2006.  Since the transfer was not within the look back period the worker processing the application would not have to determine if there should be a penalty period for the divestment.  

In December 2006, Greta moved to a nursing home and Jane sold the home.  At the time Greta was 93 years old and the FMV of the home was $78,000.  The life estate value at the time the home was sold was $19,259.76 (78,000 X .24692).  Jane transferred Greta's life estate on the home to a life estate on her condominium.  The condominium is worth $95,000.  The life estate value is $23,457.40 (95,000 X .24692).  Since the life estate on Jane's condo is worth as much or more than the life estate Greta held on the home, there is no divestment.

Example 5:  In June 2006 Marie and George transferred ownership of their home to their three sons and retained a life estate on the property.  The FMV of the home at the time of the transfer was $140,000.  At the time George was 82 and Marie was 68.  In February 2007, George applied for FC.  Since the transfer occurred in the look back period, the worker must determine the amount of the divestment and the penalty period.  To calculate the total divestment the worker must first determine the life estate values.

$140,000 divided by two = $70,000

George's age at the time of the transfer was 82.  Multiply 70,000 x .40295 = 28,206.50

Marie's age at the time of transfer was 68. Multiply 70,000 X .63610 = 44,527.00

The total life estate value for both Marie and George is $72,733.50.

The divested amount is the FMV minus the life estate value.  ($140,000 - $72,733.50 = $67,266.50)

To calculate the penalty period, divide the divested amount by the average nursing home cost of care at the time of application.  ($67,266.50 divided by $5584)  George has a 12 month penalty period so will be ineligible from June 2006 through May 2007.