1040.020.00  DETERMINATION OF TRANSFER OF ASSETS

"Transfer" is the act of changing the legal title or other right of ownership to another person. An "improper transfer" means a transfer on or any time after the look-back date, of a legal or equitable interest in a resource for less than fair market value for the purpose of qualifying for MO HealthNet benefits, a greater amount of MO HealthNet benefits, or for the purpose of avoiding the utilization of the resource to meet medical needs or other living expenses. To determine if an improper transfer of assets occurred and if it results in a period of ineligibility known as the penalty period:

• Establish the look-back date; see Income Maintenance (IM) Manual section 1040.020.05.
• Investigate any transfer of assets at initial application, annual review, and upon discovery of an unreported asset; see IM Manual section 1040.020.10.
• Establish the date of transfer; see IM Manual section 1040.020.15.
• For transferred assets other than the home, determine if the applicant/participant was eligible with the assets; see IM Manual section 1040.020.20.
• For transferred assets other than the home, determine if the transfer was made with the intent to become eligible; see IM Manual section 1040.020.25.
• Determine if fair and valuable consideration was received; see IM Manual section 1040.020.30.
• Determine if the purchase of an annuity results in an improper transfer of assets penalty; see IM Manual section 1040.020.35.
• Determine the penalty period; see IM Manual section 1040.020.40.
• Inform the applicant/participant of the penalty period and undue hardship exception; see IM Manual section 1040.020.40.20 and 1040.025.00.

1040.020.05  Establishing the Look-Back Date

Section 6011 of the Deficit Reduction Act (DRA) of 2005 amended Section 1917(c)(1)(B)(i) of the Social Security Act to lengthen the look-back period to 60 months for all transfers of property occurring on or after February 8, 2006. Previously, the look-back policy for transfers not involving annuities or trusts was thirty-six months. Transfers of annuities and trusts already had a look-back period of sixty months.

Section 6011 of the DRA of 2005 amended Section 1917(c)(1)(D) changing the beginning date of the period of ineligibility for MO HealthNet vendor or Home and Community Based (HCB) benefits. For transfers occurring on or after February 8, 2006, the beginning date for the period of ineligibility is the latter of:

• the first day of the month in which the transfer occurred; or
• the date the individual would have been eligible for institutionalized level of care (were it not for the penalty period).

Multiple periods of ineligibility are figured consecutively.

If a transfer becomes known or if the applicant/participant reports a transfer within the look-back period, determine the first date on which the applicant/participant was both institutionalized and was applying for or receiving vendor or HCB benefits. If a transfer without 'fair and valuable consideration' occurred, determine the length and start date of the penalty period, see IM Manual section 1040.020.40.

1040.020.05.05  Transfers accomplished through trusts or annuities

If an applicant/participant or individual acting on h/her behalf is the creator (also called "grantor" or "settlor") or beneficiary of a trust, the look-back period is 60 months prior to application. Transfers involving trusts will be evaluated using criteria from the Omnibus Budget Reconciliation Act of 1993 (OBRA '93) as referenced in the Income Maintenance Memorandum IM-42, dated June 23, 1994.

All trusts must be sent through the proper supervisory channels for Income Maintenance programs to MO HealthNet Program and Policy at Cole.MHNPolicy@dss.mo.gov. A copy of the complete trust is to be sent as an attachment with the Request for Interpretation of Policy (IM-14) form. A complete trust includes the "Schedule A" and an itemization of the assets used to fund the trust. Trusts will be reviewed by MHN Program and Policy and/or Division of Legal Services staff. The response will include a decision on the availability of the trust's assets to the applicant/participant and if a transfer of assets penalty applies.

All annuity contracts, including the annuity contract application, must be sent as an attachment with the Request for Interpretation of Policy (IM-14) through the proper supervisory channels for Income Maintenance programs. Designated staff in each region will review annuities to determine whether the annuity can be excluded as a resource and if a transfer of assets penalty applies. If designated staff has questions, the IM-14 and annuity will be sent to MHN Program and Policy for review.

Refer to IM Manual section 1040.020.35 for policy on annuities.

1040.020.05.10  Transfers not accomplished through trusts or annuities

Effective February 8, 2006, the look-back date for all transfer of assets is  60 months from the date the applicant/participant was first institutionalized AND applied for or received vendor or HCB benefits.

1040.020.10  Investigation of Assets Transfer

MO HealthNet applications and review forms ask if anyone has transferred property or resources. The client must answer this question to be eligible for MO HealthNet. Do not:

• Assume at application or review that a transfer has occurred.
• Automatically request information such as bank statements or tax returns for the months of the look-back period.
• Request additional information from an applicant/participant regarding transfers unless
  • evidence from other sources indicates transfers have occurred, or
  • the applicant/participant or their representative has reported a transfer.

If there is any indication the applicant/participant may have transferred real or personal assets or other available resources, regardless of its value, within the look-back period, during the application process, or while receiving MO HealthNet, further investigation must be made.

The eligibility specialist (ES) must determine at the time of application, reapplication or upon discovery of the transfer whether an individual made an improper transfer of real or personal property. The ES will initiate an inquiry regarding potential improper transfers if any source of information tends to show a transfer has occurred and request documentation verifying any transfer, including the details of any exchanges or transactions. Appropriate documentation may include but is not limited to the following:

• Deeds and mortgage statements.
• True and correct copies of federal income and gift tax returns that have been filed singly or jointly during the five tax years prior to the application.
  • At reapplication, the individual may be required to update the returns by providing true and correct copies of all federal and/or state income and gift tax returns, amended tax returns, and schedules that have been filed since the initial application or last reapplication.
  • If the individual has not retained copies of federal income and gift tax returns and schedules, the individual must secure copies from the Internal Revenue Service, the preparer of the returns, the accountant completing the return, or any other source where the returns are on file.
  • If the individual states that they have not filed federal tax returns for some or all of the required years, the individual's statement is sufficient as long as there is no available information to the contrary.
  • When there is some indication that the individual received income or made a substantial gift during any of those years, the individual must provide copies of tax returns or must provide a statement from the internal revenue service confirming the individual did not file tax returns for those years.

The eligibility specialist must utilize tax returns only to assist in establishing whether the individual made an improper transfer.

NOTE:  The ES must retain copies of the tax returns and schedules in the individual's case record. The original returns provided by the individual shall be returned subsequent to verification of any transfers of real or personal property. The tax returns, schedules, and all information contained in them must be kept confidential in order to meet the protection requirements of the individual's right to privacy.

If, after considering all the information presented by the applicant/participant, an eligibility determination cannot be made at the local office level, send a summary of the relevant information (including a copy of the deed, note, etc.) through the proper supervisory channels for Income Maintenance programs to MO HealthNet Program and Policy at Cole.MHNPolicy@dss.mo.gov. Take no action based on this factor until the decision is received from the MO HealthNet Program and Policy unit.

1040.020.10.05  Transfer of Assets Investigation, Non-Institutionalized Persons

Do not delay applications for non-institutionalized persons pending the transfer of assets determination. If the applicant/participant is eligible, the case must be approved for non-vendor benefits. Initiate all inquiries necessary to obtain information on the transfer of assets, and set a priority to complete the transfer of assets investigation.

1040.020.10.10  Transfers in exchange for lifetime care

Review cases in which assets were transferred with a stipulation for lifetime care provided by an institution. In the situation where support is being received at the institution that the lifetime care agreement has been made, the individual is ineligible for assistance. Refer to IM Manual section 1020.015.00 (Patients in Private Institutions) for further information. In cases where an agreement provides for meeting part of the individual's needs, take this into consideration in determining need.

Whenever assets were transferred on the basis of an agreement to support, and the agreement is not being carried out, request a determination of possible eligibility on this factor by sending a summary of the case situation, through the proper supervisory channels for Income Maintenance programs to MO HealthNet Program and Policy at Cole.MHNPolicy@dss.mo.gov.

1040.020.15  Establishing Date Of Transfer

Transfers of assets prior to the look-back date do not affect eligibility.

If the applicant/participant has transferred, sold, or given away any assets within the look-back period, obtain a description of the assets. Obtain facts regarding the transfer of real estate from the County Recorder's Office, if possible.

For real property a transfer of assets occurs when the grantor has signed and dated the deed, and the deed has been given to the grantee (new owner). The date of transfer is the date the deed actually changed hands. The deed or other instrument must no longer be in the physical possession of the grantor. If the deed remains in the possession of the grantor, there has not been an improper transfer. In some instances, the grantor may specify the deed is revocable; that is, it can be 'called back' at the discretion of the grantor. However, if the grantee is in possession of the deed, the assets have been transferred.

NOTE:  The deed does not have to be recorded for the transaction to be considered a legal transfer of assets.

For personal property, cash and securities, etc., the date of transfer is the date on which possession was transferred.

Enter the details of the transfer of assets on the Adult MA Transfer of Assets (FMWQ) screen. Record the name and relationship (if any) of the person(s) to whom the assets were transferred on the comment screen from Adult MA Transfer of Assets (FMWQ).

1040.020.20  Eligible With The Property

Determine whether the applicant/participant was eligible with the assets at the time of the transfer. If the applicant/participant is ineligible with the assets, the transfer of assets must be reviewed to determine if fair and adequate consideration was received in exchange for the assets. If the applicant/participant is eligible with the assets, the transfer of assets does NOT cause ineligibility under the transfer provision.

EXCEPTION: If the assets transferred were the applicant/participant's home, there may be a transfer penalty. Transfer of the home to persons other than those noted in IM Manual section 1040.010.00, is considered an improper transfer of assets. A transfer of the home to other persons must be explored to determine if fair and valuable consideration was received.

EXAMPLE:  Mr. Meeks owns his home that is valued at $40,000 with no debt. Mr. Meeks has been a resident of a vendor nursing home for the past 26 months. Mr. Meeks decides to 'sell' the home to his niece for $10,000. The uncompensated value of $30,000 must be evaluated in terms of a transfer using the nursing facility private pay rate.

1040.020.25  Transfer To Establish Eligibility

It is presumed there has been an 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 by:

• An institutionalized person, or
• His/her spouse, or
• 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
• A person, relatives, friends, volunteers, and authorized representatives, including a court or an administrative body, acting at the direction or upon the request of the institutionalized person or the person's spouse.

It is considered an improper transfer of assets if an applicant/participant takes an action to avoid receiving income or assets s/he is entitled . Actions which would cause income or assets not to be received include, but are not limited to:

• Irrevocably waiving pension income;
• Disclaiming an inheritance;
• Not accepting or accessing injury settlements;
• Diverting tort settlements into a trust or similar device, unless the trust is an excluded resource;
• Refusing to take legal action to obtain a court-ordered payment that is not being paid, such as child support or alimony;
• Refusing to take action to claim a legal portion of a deceased spouse's or parent's estate. Count the action as an improper transfer only if:
  • The value of the abandoned portion is clearly identified, and
  • There is certainty that a legal claim action will be successful.

  NOTE: This includes situations in which the will of the institutionalized person's spouse precludes any inheritance for the institutionalized person. The institutionalized person must elect to take against the will. Refer to Section 474.160 RSMo. Failure to elect to take against the may be considered a transfer of assets equal to the value of the portion of his/her spouse's estate to which the institutionalized person would be entitled.

The purchase of certain types of assets, even at the fair market value, may be considered an improper transfer, such as:

• The purchase of a life estate interest in another individual's home on or after February 8, 2006, is an improper transfer unless the purchaser resides in the home for a period of at least 12 consecutive months after the date of purchase. See IM Manual section 1040.020.30.
• The purchase or creation of a promissory note, loan or mortgage, on or after February 8, 2006 is an improper transfer unless such note, loan or mortgage meets several criteria. See IM Manual section 1040.020.30.
• The purchase of certain annuities may be considered an improper transfer. See IM Manual section 1040.020.35.

When assets that would cause ineligibility are transferred, it is presumed to have been transferred for the purpose of establishing or maintaining eligibility, unless the applicant/participant can provide convincing evidence that the transfer was made for some other purpose. Evidence will include documentation of the following:

• Intent to transfer the asset at fair market value (FMV) or other adequate compensation. To establish such an intent, the Family Support Division (FSD) must be provided with written evidence of attempts to dispose of the asset for fair market value as well as evidence to support the value (if any) of the disposed asset.
• The transfer is not made to qualify for vendor or Home and Community Based (HCB) benefits, continue to qualify, or avoid Estate Recovery. Convincing evidence must be presented regarding the specific purpose of the transfer. This evidence must not be based solely on the participant's statement.

The following transfers for less than fair market value shall not be considered an improper transfer:

• The individual may transfer the home that is still considered the principal place of residence to:
  • The individual's spouse, provided:
    • The transfer is for the sole benefit of the spouse; and
    • The individual's spouse does not subsequently transfer the home for less than fair market value; and
    • Any transfer of the home by the spouse on or after the look-back date shall be reviewed by the administrative agency under the transfer of resources provisions in this rule; and
    • The amount of the transfer is equal to one hundred per cent of the value of the property established by the county assessor at the time of the transfer, less any amount or portion of the property that is not transferred.
    • His or her child under the age of twenty-one;
  • His or her child age twenty-one or over who is blind or permanently and totally disabled as defined by Social Security Administration.
  • The individual's adult child who was residing in the home for at least two years immediately before the date the individual becomes institutionalized, and who provided care to the individual which permitted the individual to reside at home, rather than in an institution or facility. A "Level of Care (LOC) Assessment" must be completed to determine if the individual would have required institutionalization from the beginning and throughout the two-year period if the adult child had not provided personal care.
  • The individual's sibling who has an equity interest (must be a documented, legal interest) in the home and was residing in the home for at least one year immediately before the individual became institutionalized.

The individual may transfer resources other than a home as follows:

• To the individual's spouse or to another for the sole benefit of the individual's spouse.
• From the individual's spouse to another for the sole benefit of the individual's spouse.
• To the individual's child, or to a trust established solely for the benefit of the individual's child, who is blind or permanently and totally disabled as defined by Social Security Administration.
• To a trust established for the sole benefit of an individual under sixty-five years of age who is blind or permanently and totally disabled as defined by Social Security Administration.

  NOTE:  A "transfer for the sole benefit" is a transfer that cannot, under any circumstance, benefit any individual or entity except the spouse, blind or disabled child, or disabled individual, at the time of the transfer or at any time after the transfer.

In order for a transfer to be considered for the sole benefit of the spouse, blind or disabled child, or disabled individual, the entity that receives or holds the transferred resource must, by the explicit terms of a contract, trust, or other binding instrument, be required to expend all of the transferred resources for the benefit of the individual during that individual's life expectancy. When the contract, trust or other binding instrument does not contain such a requirement, the provisions governing transfers for the sole benefit do not apply. A transfer for the sole benefit of the spouse, blind or disabled child or disabled individual in which there is a provision within the trust, contract or other binding instrument to expend all of the transferred resources may provide for other beneficiaries.

A trust may provide for reasonable compensation for a trustee to manage the trust, as well as for reasonable costs associated with managing the trust or managing the property held in the trust. In determining what is reasonable, the administrative agency shall consider the amount of time and effort involved in managing the trust, as well as the prevailing rate of compensation for trustees administering trusts of similar size and/or complexity.

• Any transfer between spouses in order to comply with the minimum spousal share allotment may not be applied inconsistently with the rules setting limits on the maximum spousal share or the minimum monthly maintenance needs allowance (MMMNA).
• Any amount of a couple's resources exceeding the maximum spousal share must be used for the benefit of the institutionalized spouse and/or community spouse.
• Any amount of a couple's resources exceeding the maximum spousal share may not be transferred to the community spouse or to another for the sole benefit of the community spouse unless permitted by an administrative hearing decision.
• Any amount of a couple's resources exceeding the maximum spousal share may not be converted to another form for the purpose of generating additional income for the community spouse unless permitted in an administrative hearing decision.

Transfers in excess allowed by this policy, are presumed to be an improper transfer.

1040.020.30  Determining Fair And Valuable Consideration

Take the following steps to establish if 'Fair and Valuable Consideration' was received for the assets:

1. Determine the market value of assets minus encumbrances at time of transfer. Fair Market Value (FMV) is an estimate of the prevailing price of a resource if sold on the open market at the time it was actually transferred, based on criteria used in appraising the value of other resources for the purpose of determining MO HealthNet eligibility.
2. If the assets transferred were real property, property tax assessments of the market value and statements from one or more realtors can be used to determine the property's FMV if both the ES and applicant/participant  agree that it accurately represents the price it would sell for on the open market in that geographic area. If current value cannot be obtained and/or agreed upon using this method, make a determination based on all available facts the applicant or recipient can furnish, together with all information the  FSD staff can obtain. Take into account the purchase price and year of purchase, depreciation and state of repair, insurance valuation, appraisals made for the purpose of obtaining loans or mortgages, and known sales prices of similar property in the community.
3. Determine the amount of money or the value of other consideration (promise to pay, etc.) received in exchange for the assets.

   NOTE: This includes the value of a life estate withheld by the applicant/participant if real assets are transferred. Refer to the Carlisle Table to determine the value of a life estate.

   The applicant/participant must explain and provide documentation of the expenditure and disposition of funds received from the transfer to verify it is not an available resource to the applicant/participant.
4. Compare the two amounts to determine whether a reasonable amount was received by the applicant/participant. 'Reasonable amount' does not mean the amount received must equal the appraised value. The eligibility specialist (ES) must consult with a supervisor to determine what is reasonable. If the amount is approximately the same, it is considered that fair value was received.

Bona Fide Loans

If the applicant/participant states the transfer of personal property or cash and securities was repayment of a loan, evidence must be obtained with respect to the existence of a bona fide loan agreement. The burden of proof with respect to the bona fide nature of the loan is with the applicant/participant.

A loan is bona fide if it meets criteria for Transfer of Assets Policy for Notes, Loans or Mortgages and:

• it is supported by a written agreement to repay within a specified time or received from an individual or establishment engaged in the business of making loans; or
• there is an obligation to repay (with or without interest); or
• there is a pledge of real or personal property or anticipated income with the intent to repay when funds become available or future anticipated income is received; or
• there is a written timetable and plan for repayment.

If the documentation verifies the applicant/participant is/was repaying a bona fide loan, it does not affect eligibility on the factor of improper transfer of assets. If the documentation does not indicate the loan was bona fide, it is an improper transfer of assets or transfer without fair and valuable consideration.

Transfer of Assets Policy for Promissory Notes, Loans, or Mortgages

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 of care and HCB services. It is an improper transfer if an institutionalized person creates a promissory note prior to February 8, 2006 that has at least one of the following:

• A provision that forgives a portion of the principal, or
• A balloon payment, or
• Interest payments only, with no principal payments, or
• An inadequate interest rate (relative to current market rates) at the time the promissory note was created.

 Any funds used to purchase a promissory note, loan or mortgage on/or after February 8, 2006 shall result in a transfer of assets penalty unless all of the following criteria are met:

• The repayment term period must be actuarially sound;
• Payments must be made in equal amounts during the term of the loan and with no deferral of payments and no balloon payments; and
• Promissory notes, loans, or mortgages must prohibit the cancellation of the balance upon death of the lender.

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.

If the ES is unable to determine eligibility using the steps provided; the ES may send contracts with a Request for Interpretation of Policy (IM-14) through the proper supervisory channels for Income Maintenance programs. Program and Policy staff will review to determine if the Promise to Pay, Promissory Note, or Property Agreement is to be considered as income, a resource, and/or if a transfer of property has occurred without receiving fair and valuable consideration.

Personal Care Contracts

If the applicant/participant states the transfer of real estate, personal property, cash or securities made after August 28, 2007, was for personal care, the following conditions must be met:

• There is a written agreement between the individual or individuals providing services and the individual receiving care that specifies the type, frequency, and duration of the services to be provided. It must be signed and dated on or before the date the services began;
• The services do not duplicate those which another party is being paid to provide;
• The individual receiving the services has a documented need for the personal care services provided;
• The services are essential to avoid institutionalization of the individual receiving benefit of the services;
• Compensation for the services shall be made at the time services are performed or within two months of the provision of the services; and
• The fair market value of the services provided prior to the month of institutionalization is equal to the fair market value of the assets exchanged for the services.

  NOTE: The fair market value for services provided shall be based on the current rate paid to providers of such services in the county of residence.

A Personal Care Contract is to render services to help keep individuals from becoming institutionalized. When considering whether fair and valuable consideration was received the ES must determine the value of the services provided prior to the date the applicant/participant entered the nursing facility, and that they are equal to the fair market value of the assets exchanged for the services.

A personal care contract not meeting the conditions stated above is considered to be a transfer of assets without receiving fair and valuable consideration and is subject to penalty. If there is any question of whether or not fair and valuable consideration for the assets was received in exchange for the personal care contract, a summary of the situation must be sent to State Office Program and Policy Unit through the proper supervisory channels for Income Maintenance programs to MO HealthNet Program and Policy at Cole.MHNPolicy@dss.mo.gov. Use the Request for Interpretation of Policy (IM-14) form and provide specific case details along with a copy of documentation of the asset transfer and personal care contract.

Purchase of a Life Estate

A life estate is created when a property holder transfers ownership of the property to someone else and retains the right to live on the property and receive the income from it. The new owner of the property is referred to as the remainder person. The purchase of a life estate 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 a 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 individuals' 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.