It is not uncommon for older persons to consider transferring assets to children or other relatives in order to avoid the possibility of having to spend their funds on long term care (nursing home care).  The legal term for this practice is "divestment" and is defined under the Medical Assistance Program (Medicaid, Title 19) rules as transferring assets for less than fair market value.

It is important that people who are thinking about divestment clearly understand the risks to themselves if they do so.  The federal laws governing this area are very complex and change frequently.  One of the greatest risks that arises is with eligibility for Medical Assistance, either for nursing home care or for certain community based long term care programs, such as the Community Options Program (COP).

Depending on the timing of the asset transfer and the amount, eligibility for Medical Assistance can be denied for varying lengths of time.  The current "lookback period" used to determine a penalty is 36 months for transfers not involving trusts.  It is 60 months for transfers involving trusts.  Any transfer made on or after January 1, 2009 will be subject to a 60 month lookback period. This lookback period begins with the date of application for Medical Assistance or the date of the person's entry into an institution.  There is no limit on the duration of the period of ineligibility.

Because Medical Assistance is the only public benefit program which covers non-skilled care (but not custodial care) in a nursing facility, a denial of coverage due to divestment when a person needs institutional care could have serious consequences.

It is essential that older persons seeking legal advice regarding divestment be diligent consumers, and work with an attorney who is knowledgeable in current law regarding Medical Assistance.

(Note:  The divestment rules also apply to the SSI (Supplemental Security Income) Program, a federal income benefit for persons with very low income.  The lookback period for SSI is 36 months.  The rule applies to transfers made beginning on or after December 14, 1999.)

If a person has no life insurance, he/she may purchase a $1500 paid life insurance policy,  These policies are available from funeral directors in the community.

   A single, divorced or widowed person may be eligible for Medical Assistance and still have the following:

A.  Cash, bank accounts, stocks, certificates of deposit or other liquid assets with a total value under $2000.

B.  Irrevocable burial trusts and burial arrangements.

C.  $1500 paid life insurance policies.

D.  A home, if the nursing home resident expects to return home within a year.

E.  A car, with fair market value under $4,500.

F.  Personal possessions.

The "spousal impoverishment protections" affect married couples where one spouse is receiving certain long-term care services and the other is not.  These provisions apply whether the services are received in a nursing home or through a special homecare program under Medicaid, such as the Community Options Program Waiver (COP).

Under the "spousal impoverishment protections, "the one spouse needing long-term care services may be eligible for Medical Assistance; that is, help paying for nursing home care or for help coming into the home.  In addition the community spouse, the one staying at home, may keep some, or all, of the couple's assets.  To be eligible for Medical Assistance, the married couple must meet the following financial standards:
 

1.  The community spouse may have:

A.  Personal possessions
B.  A home of any value
C.  One vehicle of any value

2.  Both may have $1500 paid life insurance policies.  If there is more life insurance, the cash value of the policies count toward the asset limits for the couple.

3.  Both may have irrevocable burial trusts and burial arrangements which meet the Medical Assistance guidelines.

4.  The spouse needing services may have cash, bank accounts, stocks, certificates of deposit or other assets with a total value under $2000.  This standard needs to be met after one year.  This allows for transfer of ownership to the community spouse.

5.  The community spouse, the one not receiving services, may have cash, bank accounts, stocks, certificates of deposit or other liquid assets.  (See table below for the dollar amounts which may be retained.)  If these assets are held jointly or in the name of the one needing services, the married couple has one year to transfer ownership to the community spouse.

(1)  Rent or mortgage principal and interest;
(2)  Property tax liability;
(3)  Insurance for the residence;
(4)  Required maintenance charge (in the case of a condominium or cooperative); AND
(5)  The standard monthly utility allowance under the Food Stamp Program.  In 2009, the standard utility allowance under the Food Stamp Program is $285.00 if the community spouse pays all utilities; $203.00 if community spouse pays all but heat;  and $28.00 if the only utility expense is telephone.These amounts can change each year.

For further questions, you can contact the Elderly Benefit Specialist at the Aging Resource Center
at (920) 683-4180 or toll free at:  (877) 416-7083

ContactBenefit Specialist

or Manitowoc County Human Services
(920) 683-4230

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