Medicaid Planning Involving Real Estate Reference Manual Volume No. 17-W001 Ohio State Bar Association Continuing Legal Education is a division of the Ohio State Bar Association.
Ohio State Bar Association CLE is a division of the Ohio State Bar Association. CLE speakers are volunteers serving the legal profession in its highest and best tradition and as recommended by the Ohio Rules of Professional Conduct. CLE supports gender neutral language. Unless used to illustrate a specific case, all references to gender should be understood to refer, without bias, to male and female. Books and seminar materials are published as part of the Ohio State Bar Association s educational services. Authors are given the opportunity to express their individual interpretations and opinions. These do not reflect in any way a position of CLE, the Ohio State Bar Association or its governing board. Chapters written by employees of state or federal agencies are not necessarily statements of governmental policies. 2017 by Ohio State Bar Association CLE. All Rights Reserved. Ohio State Bar Association CLE publications, oral presentations, video, audio and electronic media programs are provided with the understanding that the Ohio State Bar Association and OSBA CLE do not render any legal, accounting, or other professional advice or service. Attorneys using OSBA CLE publications or orally, visually or electronically conveyed information in dealing with a specific client s or their own legal matters should also research original sources of authority. The CLE office is located at 1700 Lake Shore Drive, Columbus, Ohio 43204 Mail may be addressed to: P.O. Box 16562 Columbus, Ohio 43216-6562 CLE telephone numbers are: 614-487-8585 800-232-7124
OHIO STATE BAR ASSOCIATION CONTINUING LEGAL EDUCATION The Ohio State Bar Association Mission Statement Our Core Purpose To advance the professional interests of members of the Ohio State Bar Association. Our Core Values Member satisfaction, professionalism, foresight, and quality services and products. Our Goal To make membership in the Ohio State Bar Association indispensable to Ohio Lawyers. THE CLE STAFF Fran Wellington Director fwellington@ohiobar.org Todd Burch CLE Program Manager tburch@ohiobar.org Kerschie Byerly Senior CLE Publications Editor kbyerly@ohiobar.org Deanna Freeman CLE Program Administrator dfreeman@ohiobar.org Jennifer Harrell Senior CLE Program Manager jharrell@ohiobar.org Chris Loehrer Studio Operations Manager cloehrer@ohiobar.org Lynda Morris CLE Program Coordinator lmorris@ohiobar.org Melissa Quick Manager of CLE Certification and Specialization mquick@ohiobar.org
Medicaid Planning Involving Real Estate Vol. # 17-W001 1.0 CLE Credit Hour Wednesday, January 11, 2017 at 1:00pm Featuring: Janet E. Pecquet and Ashley S. Burke Beckman Weil & Shepardson LLC; Cincinnati This presentation is a live webcast. If you have a question for the speaker during the presentation, please feel free to submit your inquiry to webquestions@ohiobar.org with Medicaid Planning in the subject line or call 1-800-232-7124, and let the operator know that you have a question for the seminar speaker. The Supreme Court Commission on CLE has requested that we advise you that this webcast seminar is considered self-study. Under current regulations you are allowed to earn up to 6 of your 24 required CLE credits through self-study. In order to receive CLE credit for this webcast, you must view the entire program. No partial credit can be given. As you watch today s webcast at your computer, you should be looking for four unique Attendance Verification code letters. Each part of the code consists of a single letter that will appear on your screen periodically during the program. These four letters form a four-part code that documents your participation in this CLE program. When the course ends, go back to your self-study CLE account, from where you launched the webcast. Click on the tab marked Certificate and enter the four code letters in the order you received them. If the code is correct, the participation code requirement will display complete. You will also need to complete the course evaluation. Once these two requirements are met, you will be able to access a Certificate of Completion documenting your attendance and CLE credit hours. CLE regulations require that we submit requests for credit within 30 days of the date of the seminar or be assessed a late fee. If you do not enter the attendance verification codes or complete the evaluation, then we will not be able to report your credit.
Speaker Biographies Ashley S. Burke Beckman Weil Shepardson LLC Cincinnati, Ohio Ms. Burke received her BA from The Ohio State University and her JD from the University of Cincinnati College of Law. She is a member of the Ohio State Bar Association, Cincinnati Bar Association (Chair, Elder Law Committee), Association of Professionals in Aging, and National Academy of Elder Law Attorneys National and Ohio Chapters (President-Elect, Ohio Chapter). Ms. Burke is an associate of her firm and represents clients in the areas of elder law and estate planning and probate administration. She advises clients on Medicaid planning, estate planning for families with disabilities, lifetime gifting, transfers at death, and asset protection. Ms. Burke also assists clients with trust and estate Administration. For additional information, please visit www.beckman-weil.com. Janet E. Pecquet Beckman Weil Shepardson LLC Cincinnati, Ohio Ms. Pecquet received her BA from California State University, Long Beach and her JD from Southwestern University School of Law. Her professional memberships include the National Academy of Elder Law Attorneys and the Ohio State Bar Association (Chair, Elder and Special Needs Law Committee). Ms. Pecquet is a partner of her firm and practices in the area of elder law, primarily planning for Medicaid eligibility for individuals who are institutionalized in a nursing facility or assisted living facility or living at home and seeking home- and community-based care. This includes developing Medicaid eligibility plans, filing applications, meeting with the Medicaid Department and appealing decisions, if necessary, and developing a plan for the family. Ms. Pecquet has represented hundreds of consumers before the Medicaid Agency. She also advises individuals and parents of children with special needs on estate planning and special needs trusts. Long-term care insurance and private disability insurance denials are also a focus of her practice. Ms. Pecquet is a frequent speaker on elder law matters and participates in various community organizations involved in providing services to consumers who are aged and have special needs. For additional information, please visit www.beckman-weil.com.
Medicaid Planning Involving Real Estate Issues Ashley S. Burke Janet E. Pecquet Beckman Weil Shepardson LLC Cincinnati, Ohio Table of Contents The Home as the Principal Place of Residence Changed Rule... 2 The Home in A Revocable Trust Changed Rule... 2 Home Essential to Self-Support... 2 The Home That Is Co-Owned New Rule... 3 Domestic Violence Exemption New Rule... 3 Home Value Exceeding $560,000 (2017) for a Single Individual... 3 What If None of the Above Applies?... 3 Selling the Home... 4 Home Replacement Rule... 4 Home Transfer Rule... 4 Jointly Owned Real Estate... 5 Co-Owned Real Estate... 5 Life Estates... 5 Life Lease... 6 Mortgages/Property Agreements/Land Contracts... 6 Reverse Mortgages... 6 Liens... 6 Estate Recovery... 7 Transfer-on-Death Affidavits... 8 Using the Real Estate as Part of the Planning Process... 8 Medicaid Planning Involving Real Estate Issues i
Appendix A... 11 Transfer of Assets General Review of Transfer Rules... 11 Four Elements to an Improper Transfer... 11 Certain Transfers Are Permitted... 12 When Transfers Are Examined: The Look-Back Period... 12 Consequence of an improper transfer:... 12 The Penalty Period... 13 Example:... 13 Another Example:... 13 A Third Example:... 13 Proceed with caution!... 13 Undue Hardship... 13 ii Medicaid Planning Involving Real Estate
Medicaid Planning Involving Real Estate Issues Ashley S. Burke Janet E. Pecquet Beckman Weil Shepardson LLC Cincinnati, Ohio There are many different categories of individuals who can be eligible for Medicaid. This material only addresses the category of individuals who need Medicaid to pay for nursing facility, PASSPORT, and assisted living waiver services ( individual refers to the Medicaid applicant/recipient throughout this material). Issues specifically related to real estate include: The home as an exempt resource How should the home be titled? What if the home is in a revocable trust? What if the home is co-owned? When does the home become a countable resource? How is a life estate treated? How are mortgages treated, including reverse mortgages? To whom may the home be transferred? What if the home has to be sold? When can a lien be placed on the home? How does Estate Recovery affect the home? Medicaid Planning Involving Real Estate Issues 1
The Home as the Principal Place of Residence Changed Rule The Medicaid resource standard for an individual is $2000 (the resource limit changed effective August 1, 2016, to $2000 for an individual). Not counted as part of this resource limit are the home and the land appertaining to the home property, provided the home is the principal place of residence of one of the following: individual, spouse, dependent relative: child, step/grandchild; parent/step/ grandparent; aunt, uncle, niece, nephew; sibling, step/half; cousin; in-law. Ohio Admin. Code 5160:1-3-05.13(C)(4). Appertaining land must be contiguous to adjoin the land on which the home property is located and must not be separated by intervening land property owned by others. Ohio Admin. Code 5160:1-3-05.13(B)(1). Principal place of residence means that (1) the individual lives in the home and considers the residence to be his or her home, or (2) intends to return to the home and has not established a permanent residence elsewhere. A signed statement is required. Ohio Admin. Code 5160:1-3-05.13(C)(3). The Home in A Revocable Trust Changed Rule If the home is in a revocable trust, it retains its exempt character provided the principal of the trust is a resource to the individual and/or his or her spouse. Home Essential to Self-Support If the home does not fall under one of the above exemptions, the home can still be exempt if it is essential to self-support. If the home is essential to self-support, it will be exempt. This rule also applies to other real estate and personal property. Ohio Admin. Code 5160:1-3-05.19. Property used: in a trade or business, pursuant to government authority to engage in income-producing activity, or property used by an individual as an employee for work is excluded regardless of rate of return. The first 6000 in equity of nonbusiness property (real or personal) used to produce goods or services essential to basic daily living needs is excluded as a resource, regardless of rate of return. Nonbusiness income-producing property is excluded up to $6000 in equity, provided the income is at least 6 percent of the equity. There are many other requirements in this rule so review it carefully if it applies to your client. 2 Medicaid Planning Involving Real Estate
The Home That Is Co-Owned New Rule The home can remain exempt if it is co-owned with another individual and the sale of the home causes undue hardship for the co-owner who also lives there, has no other living quarter readily available, and will have to move if the property is sold. A signed statement by the co-owner is required. Ohio Admin. Code 5160:1-3-05.13(C)(3). Domestic Violence Exemption New Rule The home can remain exempt if the individual leaves the home due to domestic violence and considers the home his or her principal place of residence. Ohio Admin. Code 5160:1-3-05.13(C)(3). Home Value Exceeding $560,000 (2017) for a Single Individual For applications filed on or after January 1, 2006, if the equity in the home exceeds $560,000 (2017), the individual is not eligible for LTCF services or HCBS waiver services, even if the home is the principal place of residence, unless the spouse, dependent, and/or disabled child live in the home. The individual may use a reverse mortgage to reduce the equity in the home. Ohio Rev. Code 5163.32; Ohio Admin. Code 5160:1-3-05.13(D). In other words, a single person with home equity above $560,000 (2017) will be over the $2000 resource limit unless he or she reduces the equity. The department may waive this provision if there is undue hardship deprivation of health, food, clothing, shelter, and other necessities. The individual must show that he or she has tried to reduce the home equity before the undue hardship exception will be approved. What If None of the Above Applies? What if none of the above exemptions applies to the home? What happens? Technically, the individual is over the $2000 resource limit and is not eligible for Medicaid. The rules in effect prior to August 1, 2016, provided for a 13-month time period before the home had to be listed for sale, and then provided instructions on selling the home. Those rules have been rescinded, and the new rules are silent. Ohio has presumably become a 1634 state, meaning Ohio has adopted the rules in place for the Supplemental Security Income program. That program has rules about the non-liquid resource that causes ineligibility: essentially, non-liquid property that causes ineligibility can be placed for sale at a reasonable value, and the individual will be eligible for a conditional nine-month period. If the property has not been sold after this nine-month period, then the property can remain excluded as a resource if the individual continues to make a reasonable effort to sell. See Social Security Administration Program Operations Manual System (POMS) SI 01150.200 and 01130.140. No similar provisions are in the Ohio Administrative Code. Medicaid Planning Involving Real Estate Issues 3
Selling the Home The previous rules required the home to be listed for sale at the auditor s value, unless it qualified as essential for self-support, the individual had to make a bona fide effort to sell the home, and offers of 90 percent of the auditor s value had to be accepted. Provided the individual was making a bona fide effort to sell the home, the home was an unavailable resource until it was sold. The property had to be listed with a broker or real estate agent and the individual had to make a bona fide effort to sell the property. At least one written appraisal was needed to support a listing value at less than the county auditor s value. Ohio Admin. Code 5160:1-3-05.15 (rescinded). The rules are silent on these issues. The authors continue to follow these procedures, although the POMS cited above only require that the property be sold at a reasonable value, which could be less than 90 percent of the auditor/appraised value. If the home is sold, the proceeds will be treated as a lump sum unless another home is being purchased. Ohio Admin. Code 5160:1-3-05.15 and 5160:1-3-05.8. Home Replacement Rule If the home is sold, and if the applicant plans to purchase another home, the proceeds from the sale are excluded through the last day of the third month after the month the proceeds from the sale are received. Ohio Admin. Code 5160:1-3-05.16. Interest earned on the sale proceeds is not excluded. Costs used or obligated to purchase and occupy an excluded home are excluded. If the individual does not then purchase the home within the time limit, the proceeds from the sale are counted as a resource beginning with the month following the month of receipt. Home Transfer Rule Transfers of an otherwise exempt home are considered improper if made for less than fair market value during the sixty months prior to a Medicaid application, or any time after, unless the home is transferred to one of the following individuals while it is the principal place of residence of the Medicaid individual: 1. The spouse of the individual, provided the spouse does not subsequently transfer the home to a third party; 2. The individual s child under the age of 21; 3. The individual s child over the age of 21 who is blind or permanently disabled (must meet the disability criteria for Social Security benefits). See Ohio Admin. Code 5160:1-3-02(A) and (B); 4. The individual s child over the age of 21, who was living in the home for the twoyear period before the individual is placed into the nursing facility, and who, during this two-year period, provided care to the individual that prevented the individual from entering a long-term care facility. This Adult Caretaker Child exception requires that the child provide evidence of the parent s level of care the parent must have needed care at the intermediate or skilled level for the 4 Medicaid Planning Involving Real Estate
entire two-year period, as certified by the parent s physician, using Medicaid Form 3697. This form is located on ODM website at www.odm.state.oh.us/forms/results1.asp. 5. The individual s sibling who has lived in the home for the year before the individual enters the nursing facility and who has an equity interest in the home. Generally, paying taxes, insurance, utilities, and/or home repairs satisfies this rule. Ohio Admin. Code 5160:1-3-07.2(E)(1). Jointly Owned Real Estate Property owned jointly with another person is treated as belonging 100 percent to the individual unless the other owner can show he or she contributed to the acquisition of the property. A jointly owned home is deemed to belong 100 percent to the recipient. Ohio Admin. Code 5160:1-3-05.1(C)(4). If the other joint tenant can show a contribution to the acquisition/maintenance of the home, the joint tenant may be able to get his or her contribution back if the home sells, or if the joint tenant paid in full for the home, the joint tenant may be able to transfer ownership to him or herself. Co-Owned Real Estate Property that is co-owned with another person (i.e., co-tenancy or partial interest) will be deemed to be available to the extent of the ownership, unless the property qualifies for one of the exemptions listed above. If the co-owner (1) refuses to make the property available, or (2) cannot be located, or (3) the cost of legal action to make the resource available is prohibitive, or (4) the individual is unsuccessful in making the resource available, the property will be considered unavailable as a countable resource. Ohio Admin. Code 5160:1-3-05.1(C)(4). Life Estates A life estate is valued by multiplying the equity value of the property by the product corresponding to the life estate owner s age in the table located at Ohio Admin. Code 5160:1-3-05.17. Prior Policy: The rule directed workers to use the table found in 26 C.F.R 20.2031-7. The Centers for Medicare and Medicaid Services (CMS) (the federal arm of the Medicaid program administration) advises states to use the tables in the Social Security Program Operations Manual System (POMS) at section SI 01140.120. See http://downloads.cms.gov/cmsgov/archived-downloads/smdl/downloads /TOAEnclosure.pdf, referencing 26 C.F.R. 20.2031-7. The table in Ohio Admin. Code 5160:1-3-05.17 is more restrictive than the table in the C.F.R. If the life estate cannot be sold or assigned, it is not a countable resource, but the transfer of the interest may be treated as improper. The date of transfer is the date the life estate is created unless the deed is recorded more than six months after it is signed, Medicaid Planning Involving Real Estate Issues 5
Life Lease in which case the date of transfer is the date the deed is recorded, absent independent evidence that the transfer occurred on the date of signature. Ohio Admin. Code 5160:1-3-05.17. The purchase of a life estate by the individual in someone else s home is a countable resource until the individual lives in the home for at least a year after the date of purchase. Ohio Admin. Code 5160:1-3-05.17(I). A life lease is: a written tenancy agreement giving a person certain rights to property during the person s lifetime. Ohio Admin. Code 5160:1-3-05.17. The interest in a life lease will be exempt if the property is the individual s principal place of residence. Otherwise, the current market value of a life lease will vary according to the terms agreed upon and the life expectancy of the lessee. Id. Mortgages/Property Agreements/Land Contracts If the applicant owns a promissory note secured by a mortgage, the principal balance of the note is a countable resource, unless the note cannot be sold, in which case ODM may treat the transaction as an improper transfer, or as an unavailable resource, depending on the circumstances. Ohio Admin. Code 5160:1-3-05.5. A property agreement must be recorded; [t]he administrative agency shall disregard any property agreement that is not properly recorded and shall consider the entire property as an available resource to the individual. Ohio Admin. Code 5160:1-3-05.5(C)(3)(a). Reverse Mortgages Liens Funds created from a reverse mortgage should not be treated as countable resources provided the funds are spent in the month of receipt. Income from a reverse mortgage will be unearned income in the month of receipt. ODM may place a lien on real estate owned by the permanently institutionalized Medicaid recipient or owned by the spouse of the recipient unless the following reside in the property: spouse child under 21 blind/disabled child sibling with an equity interest in the home who has lived in the home for at least one year prior to the date of death of the Medicaid recipient. If the recipient is alive when the lien is placed on the property, it must be dissolved if the recipient returns home. Ohio Rev. Code 5162.211. 6 Medicaid Planning Involving Real Estate
Is an affidavit relating to title under Ohio Rev. Code 5301.252 a lien when the affidavit states that ODM may have a claim against the property? ODM takes the position that it is not, although such an affidavit can affect the ability of the homeowner to refinance real estate. ODM records these Affidavits even when the spouse lives in the property. Contact Bob Byrne at the Ohio Attorney General s office if you have issues related to a lien, his email is robert.byrne@ohioattorneygeneral.gov. Estate Recovery Medicaid estate recovery permits ODM to recover Medicaid payments (excluding QMB payments) from the recipient s estate (probate and non-probate) if the individual is: (1) 55 and over, or (2) any age and permanently institutionalized, other than benefits paid on or after January 1, 2010, under the Medicare premium assistance programs. Ohio Admin. Code 5160:1-2-07. This includes all non-probate property in which the recipient had an interest immediately prior to death. Not included is property owned solely by the spouse. Recovery must be delayed until the surviving spouse and/or child who is disabled/ blind/or under the age of 21 are deceased. Recovery applies to the resources that were titled in the name of the Medicaid recipient at the time of the Medicaid recipient s death. If the Medicaid recipient is married and if the resources have been transferred to the community spouse prior to death (which they should be), then there should be no recovery against them. The administrator of the probate estate must give notice to the Medicaid recovery department as provided in Ohio Rev. Code 2117.061. Once notified, the State has 90 days to file a claim in the probate estate. In Centorbi, the Ohio Supreme Court ruled that the 90-day time limit set forth in Ohio Rev. Code 2117.061 begins to run when the Medicaid estate recovery program is notified of an estate whose decedent was a Medicaid beneficiary who was 55 years of age or older. If notice is not given, the time limit does not begin to run. In re Estate of Centorbi, 129 Ohio St. 3d 78, 2011-Ohio-2267 (2011). The Estate Recovery Rule delays recovery against the home as follows: (D)(3)... no recovery may be made against the individual s home while either of the following lawfully resides in the home: (a) The permanently institutionalized individual s sibling who: (i) Resided in the home for at least one year immediately before the date of the individual's admission to the institution, and (ii) Has resided in the home on a continuous basis since that time. (b) The permanently institutionalized individual's son or daughter who: (i) Provided care to the permanently institutionalized individual that delayed the individual's institutionalization, and (ii) Resided in the home for at least two years immediately before the date of the individual's admission to the institution, and Medicaid Planning Involving Real Estate Issues 7
(iii) Has resided in the home on a continuous basis since that time, and (iv) Documents that he or she has fulfilled these requirements by submitting the following: (a) A written statement of the date that he or she moved into the home; (b) A level of care assessment showing that the individual would have become institutionalized earlier without care provided by the adult son or daughter; (c) A written statement from the individual s attending physician, stating the kind and duration of care that was required to delay the individual s institutionalization; and (d) All relevant documentation of the care that delayed institutionalization and the role the adult son or daughter played in that care. This documentation shall include (but is not limited to) one or more of the following: (i) A written statement of the number of hours per day during which the adult son or daughter provided personal care, specifying the extent and type of care provided; (ii) A written statement of any part-time or full-time jobs performed by the adult son or daughter, and any schools or other similar institutions attended by the adult son or daughter, while providing care; or (iii) Written documentation from a service agency which provided care to the individual, the dates on which care was provided, and the extent and type of care provided. Ohio Admin. Code 5160:1-2-07(D)(3). Transfer-on-Death Affidavits Beneficiaries of TOD affidavits must provide a written certification to the county recorder that the owner or predeceased spouse had or had not received Medicaid benefits. A copy is then sent to the estate recovery program. Furthermore, if the deed is in the community spouse s name, TOD to the children, and the community spouse dies before the recipient, it is possible that the county JFS will find the transfer to be improper and insist that the real estate be returned to the recipient, be sold, and the proceeds used to pay for care. Using the Real Estate as Part of the Planning Process Pay off a mortgage on the principal place of residence Make home repairs Purchase a new home Buy a life estate in the child s home, provided the parent lives there at least a year and the life estate cannot be sold or transferred 8 Medicaid Planning Involving Real Estate
Transfer the title to a disabled child, adult caretaker child, sibling, or dependent child, if applicable When both parents are institutionalized, need Medicaid, and jointly own the house, buy the house at a reduced value and split the period of restricted coverage between the parents Make sure to title the real estate in the community spouse s name if possible With an estate recovery situation against the real estate, see if the child contributed to the real estate s maintenance if so, the contribution may offset the recovery amount. Medicaid Planning Involving Real Estate Issues 9
10 Medicaid Planning Involving Real Estate
Appendix A Transfer of Assets General Review of Transfer Rules Medicaid Transfer of Asset rules are complicated. A Medicaid application filed at the wrong time can have a profound and possibly disastrous effect on the individual s ability to obtain Medicaid. The Medicaid transfer of assets rules can be found at 42 U.S.C. 1396p(c), Ohio Rev. Code 5163.30, and Ohio Admin. Code 5160:1-3-07.2. Restricted period of coverage types of medical services to which the Medicaid transfer of asset rules apply: The Medicaid penalty is a restricted period of coverage during which Medicaid will not pay for nursing facility services or services provided through a home and community based waiver (such as PASSPORT, the assisted living waiver, and the Home Care Waiver program). The individual under a Medicaid transfer penalty remains potentially eligible for Medicaid to pay for all other medical services, such as pharmaceutical drugs and home health benefits. A resource transfer is considered to be improper if the individual transfers his legal interest in a countable resource for less than fair market value for the purpose of qualifying for Medicaid, a greater amount of Medicaid, or to avoid the use of the resource during the 60-months prior to the month of the Medicaid application. The individual must be otherwise eligible before a period of restrictive coverage can be imposed. Four Elements to an Improper Transfer 1. The transfer of a legal interest: Which is an exchange of ownership, such as taking one s name off of an asset, giving an asset away to another person or entity, the reduction of an ownership interest in property, including acts done by a spouse, agent, or attorney-in-fact. Adding a name to an asset as a joint tenant is not a transfer of a resource, but adding a tenant-in-common is a transfer of a resource because it is a reduction of ownership. 2. In a countable resource: Except for transfers of the home, the asset being transferred must be countable for Medicaid purposes for the transfer to be considered improper. In other words, the transfer of an exempt resource is by definition not improper, with the exception of the transfer of a home (see below). 3. For less than fair market value: The individual must receive less than the fair value of the asset being transferred to be considered to be improper. Example: a car worth $25,000 and sold for $15,000 will be found to have been transferred for less than fair market value in the amount of $10,000. Medicaid Planning Involving Real Estate Issues 11
4. For the purpose of qualifying for Medicaid, a greater amount of Medicaid, or to avoid the use of a resource: A transfer of an asset is not improper if made for reasons not associated with obtaining Medicaid or remaining eligible for Medicaid. If the transfer falls within the above definition, then a presumption arises that the transfer was completed to qualify for Medicaid. This presumption may be rebutted with clear, convincing and credible evidence that the transfer was solely for other reasons, such as transfers made (1) as part of an established gifting pattern or (2) with the intent and belief that fair value was being received in exchange for the transferred asset, or (3) transfers made without the intent to qualify for Medicaid, such as transfers made prior to the need for medical services, when the individual is in good health. Certain Transfers Are Permitted 1. Transfers between spouses or to another for the sole benefit of the spouse. 2. The transfer of any asset to a disabled child. Disabled child means child over the age of eighteen who is unable to engage in any substantial gainful activity because of a physical and/or mental impairment that has lasted, or can be expected to last, at least 12 months, or result in death. 3. Transfers for fair value. 4. Transfers of an exempt resource other than the home to a third party. 5. A transfer into a special needs trust or a Medicaid pooled trust. 6. Transfers made exclusively for a reason other than qualifying for Medicaid. When Transfers Are Examined: The Look-Back Period When an individual applies for Medicaid, Medicaid examines transfers made by the individual, his or her spouse, or any individual acting on the individual/spouse s behalf, during the 60-month period before the application and institutionalization, (or if not institutionalized, the date of application). This is called the look-back period. Transfers made during this time period are presumed to have been done to qualify for Medicaid or to protect future eligibility. If this presumption is not rebutted by clear, convincing and credible evidence, then Medicaid imposes a penalty, called a restricted period of eligibility. Consequence of an improper transfer: Transfers of assets that are determined to be improper result in a penalty. Medicaid will not pay for the following medical services during the period of restricted coverage: Nursing facility services and Home and Community Based Services, such as PASSPORT, the Home Care Waiver, Individual Options Waiver, the Residential Facility Services Waiver, the Assisted Living Waiver. 12 Medicaid Planning Involving Real Estate
The Penalty Period The length of time during which the penalty applies, is determined by the following formula: the amount of the transferred asset is divided by the average private pay rate of a nursing facility in Ohio, currently $6570 (2017), to determine the number of months that Medicaid will not pay for the above listed services. The penalty begins the month the applicant is otherwise eligible and carries forward until the number of months is satisfied or until the asset has been reconveyed. There is no cap on the length of the penalty period, and no reduction in the period for a partial reconveyance. Example: Joan gives $100,000 cash to her niece on January 1, 2014. A year later, on January 1, 2015, Joan goes into a nursing facility and applies for Medicaid. Medicaid looks back 60 months from January 1, 2015, the date Joan both enters the facility and applies for Medicaid. The January 1, 2014, gift is reviewed. Joan is unable to rebut the presumption that the transfer was done so Joan could get Medicaid to pay for her care, and a penalty is applied. The penalty begins the month of that Joan is otherwise eligible for Medicaid, January 1, 2017, and continues for the next 15.8 months: $100,000 $6,570 = 15.2 months. Joan cannot qualify for Medicaid to pay for her nursing facility services until part-way through April 2018. Another Example: Joan gives $600,000 to her niece on January 1, 2011. Four years and eleven months later (59 months), a Medicaid application is filed. Joan has countable resources under the $2,000 limit and meets the nursing facility level of care. The gift is within the look-back and the transfer results in a period of restrictive coverage of 91.3 months, beginning when the Medicaid applicant is otherwise eligible for Medicaid. A Third Example: Joan gives $600,000 to her niece on January 1, 2011. Five years and two months later (62 months), a Medicaid application is filed. The gift is outside the look-back and Joan is approved for Medicaid. Proceed with caution! Multiple transfers incur multiple periods of ineligibility. The first period of ineligibility must expire before a new period begins. Undue Hardship When an asset has been transferred and the individual is unable to rebut the presumption that the transfer is improper, Medicaid must determine whether the individual will suffer undue hardship if Medicaid benefits are denied. Medicaid Planning Involving Real Estate Issues 13
An undue hardship is said to exist if the individual s attempts to make the resources available by consulting with legal counsel and it has been determined that the resources no longer exist, are unavailable or that the costs in attempting to retrieve the resources are prohibitive. Incompetent individuals with no agent or guardian are referred to the county prosecutor or Medicaid s in-house legal staff to attempt to make the resource available. 14 Medicaid Planning Involving Real Estate