Transfers of Assets and Treatment of Trusts
3257. TRANSFERS OF ASSETS AND TREATMENT OF TRUSTS
A. General.--Section 13611 of the Omnibus Budget
Reconciliation Act of 1993 (OBRA 1993) amended §1917 of the Act by
incorporating in §§1917(c) and (d) new requirements for treatment of
transfers of assets for less than fair market value and for treatment of
trusts. The following instructions apply only to transfers made and
trusts established after the effective date explained in §3258.2. For
transfers made and trusts established before that effective date, the
old policies regarding treatment of trusts and transfers apply. See
§§3215 and 3250 for instructions on the treatment of trusts established
and transfers made before August 11, 1993.
B. Definitions.--The following definitions apply, as
appropriate, to both transfers of assets and trusts:
1. Individual.--As used in this instruction, the
term "individual" includes the individual himself or herself, as well
as:
o The individual''s spouse, where the spouse is acting
in the place of or on behalf of the individual;
o A person, including a court or administrative body,
with legal authority to act in place of or on behalf of the individual
or the individual''s spouse; and
o Any person, including a court or administrative
body, acting at the direction or upon the request of the individual or
the individual''s spouse.
2. Spouse.--This is a person who is considered
legally married to an individual under the laws of the State in which
the individual is applying for or receiving Medicaid.
3. Assets.--For purposes of this section, assets
include all income and resources of the individual and of the
individual''s spouse. This includes income or resources which the
individual or the individual''s spouse is entitled to but does not
receive because of any action by:
o The individual or the individual''s spouse;
o A person, including a court or administrative body,
with legal authority to act in place of or on behalf of the individual
or the individual''s spouse; or
o Any person, including a court or administrative
body, acting at the direction or upon the request of the individual or
the individual''s spouse.
For purposes of this section, the term "assets an individual or spouse
is entitled to" includes assets to which the individual is entitled or
would be entitled if action had not been taken to avoid receiving the
assets.
The following are examples of actions which would cause income or
resources not to be received:
o Irrevocably waiving pension income;
o Waiving the right to receive an inheritance;
o Not accepting or accessing injury settlements;
o Tort settlements which are diverted by the defendant
into a trust or similar device to be held for the benefit of an
individual who is a plaintiff; and
o Refusal to take legal action to obtain a court
ordered payment that is not being paid, such as child support or
alimony.
However, failure to cause assets to be received does not
entail a transfer of assets for less than fair market value in all
instances. For example, the individual may not be able to afford to take
the necessary action to obtain the assets. Or, the cost of obtaining the
assets may be greater than the assets are worth, thus effectively
rendering the assets worthless to the individual. Examine the specific
circumstances of each case before making a decision whether an
uncompensated asset transfer occurred.
4. Resources.--For purposes of this section, the
definition of resources is the same definition used by the Supplemental
Security Income (SSI) program, except that the home is not excluded for
institutionalized individuals. In determining whether a transfer of
assets or a trust involves an SSI-countable resource, use those resource
exclusions and disregards used by the SSI program, except for the
exclusion of the home for institutionalized individuals.
In determining whether resources have been transferred for less than
fair market value, you may not apply more liberal definitions of
resources which you may be using under §1902(r)(2) of the Act. For
transfer of assets purposes, if you are a 209(b) State, you cannot use
more restrictive definitions of resources that you may have in your
State plan.
However, in determining whether and how a trust is counted in
determining eligibility, you may apply more liberal methodologies for
resources which you may be using under §1902(r)(2) of the Act. For trust
purposes, if you are a 209(b) State, you may use more restrictive
definitions of resources that you may have in your State plan.
For noninstitutionalized individuals, the home remains an exempt
resource.
5. Income.--For purposes of this section, the
definition of income is the same definition used by the SSI program. In
determining whether a transfer of assets involves SSI-countable income,
take into account those income exclusions and disregards used by the SSI
program.
You may not, for transfer of assets purposes, apply more liberal
definitions of income that you may be using under §1902(r)(2) of the
Act. If you are a 209(b) State, you cannot use more restrictive
definitions of income that you may have in your State plan.
However, in determining whether and how a trust is counted in
determining eligibility, you may apply more liberal methodologies for
income which you may be using under §1902(r)(2) of the Act. Also, for
trust purposes, if you are a 209(b) State, you may use more restrictive
definitions of income that you may have in your State plan.
6. For the Sole Benefit of.--A transfer is
considered to be for the sole benefit of a spouse, blind or disabled
child, or a disabled individual if the transfer is arranged in such a
way that no individual or entity except the spouse, blind or disabled
child, or disabled individual can benefit from the assets transferred in
any way, whether at the time of the transfer or at any time in the
future.
Similarly, a trust is considered to be established for the sole benefit
of a spouse, blind or disabled child, or disabled individual if the
trust benefits no one but that individual, whether at the time the trust
is established or any time in the future. However, the trust may provide
for reasonable compensation, as defined by the State, for a trustee or
trustees to manage the trust, as well as for reasonable costs associated
with investing or otherwise managing the funds or property in the trust.
In defining what is reasonable compensation, consider the amount of time
and effort involved in managing a trust of the size involved, as well as
the prevailing rate of compensation, if any, for managing a trust of
similar size and complexity.
A transfer, transfer instrument, or trust that provides for funds or
property to pass to a beneficiary who is not the spouse, blind or
disabled child, or disabled individual is not considered to be
established for the sole benefit of one of these individuals. In order
for a transfer or trust to be considered to be for the sole benefit of
one of these individuals, the instrument or document must provide for
the spending of the funds involved for the benefit of the individual on
a basis that is actuarially sound based on the life expectancy of the
individual involved. When the instrument or document does not so
provide, any potential exemption from penalty or consideration for
eligibility purposes is void.
An exception to this requirement exists for trusts discussed in §3259.7.
Under these exceptions, the trust instrument must provide that any funds
remaining in the trust upon the death of the individual must go to the
State, up to the amount of Medicaid benefits paid on the individual''s
behalf. When these exceptions require that the trust be for the sole
benefit of an individual, the restriction discussed in the previous
paragraph does not apply when the trust instrument designates the State
as the recipient of funds from the trust. Also, the trust may provide
for disbursal of funds to other beneficiaries, provided the trust does
not permit such disbursals until the State''s claim is satisfied.
Finally, "pooled" trusts may provide that the trust can retain a certain
percentage of the funds in the trust account upon the death of the
beneficiary.