Effective: May 1, 2012
19.10.05 - Self-Employment Excluded Assets
The health care programs allow certain exclusions for property used in a trade or business. Method B allows additional exclusions for other types of Self-Support Excluded Assets. This section covers the exclusion for self-employment assets.
Types of Self-Employment Assets.
MinnesotaCare and MA Method A.
MA Method B, MA-EPD and Medicare Savings Programs (MSP).
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Types of Self-Employment Assets
The following is a general list of the types of self-employment assets:
l Tools, machinery, and farm implements.
l Unsold Inventory.
l Business checking accounts, including those that are used for both business and personal expenses.
l Real Property, such as farmland that is not adjacent to or adjoined to the homestead. See Non-Homestead Real Property.
l Rental Property, if it is part of a trade or business.
Note: Rental assets not excluded as self-employment assets may be excluded for some programs if they are Self-Support Excluded Assets.
Glenda owns and is the sole proprietor of a business that owns and manages five apartment buildings.
The apartment buildings are Glenda's assets used in a trade or business.
Carlos owns a small piece of land and rents it to the farmer of the neighboring property. Carlos used the land for hunting pheasant in his younger years.
The rental property is not used in a trade or business. See Self-Support Excluded Assets for information on how to evaluate this property for Method B.
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MinnesotaCare and MA Method A
Exclude assets of a trade or business, needed for a client to earn income, up to a maximum net value of $200,000 per household.
Darrin farms 60 acres of land, with a net value of $300,000. This land is on the same expanse of land that his homestead is on. He also rents 10 acres of land to another farmer. The 10-acre tract is valued at $50,000 and is located two miles away.
The 60 acres adjacent to the homestead is considered part of the homestead and is excluded. The 10 acres Darrin rents is considered part of Darrin’s farm business. Apply the $50,000 net value to Darrin’s self-employment asset total. It is under the $200,000 self-employment asset limit so is excluded.
Continue to exclude self-employment assets up to $200,000 that are temporarily not being used due to the self-employed person's illness or disability.
Note: Exclude these assets for up to one year if the person expects to resume self-employment by the end of that time.
Chip owns a lawn care business. At renewal, he reports his self-employment assets continue to be less than $200,000. In May he was diagnosed with a rare illness that requires eight months of medical treatment. His illness prevents him from operating the lawn care business. He indicates he should be able to return to the business once he completes the treatment.
Continue to exclude the assets of Chip's lawn care business. The self-employment assets remain excluded because their net value does not exceed $200,000, the reason for their nonuse is an illness and Chip expects to resume the business in less than a year.
Contact a client if he or she reports self-employment assets with a total net value greater than $200,000.
l Clarify the value of each self-employment asset and inquire about any encumbrances associated with the asset.
l Accept the client’s statement of the value of the self-employment assets and the amount of encumbrances A legal claim against real or personal property payable when the property is sold..
l If the business is jointly owned, see Jointly Owned Assets.
l For more information on whose self-employment assets to count in the household total see Deeming of Assets.
l Calculate the total net value of the client's self-employment assets based on information the client provides.
l Count the net value of self-employment assets in excess of $200,000 in the client’s asset total.
Jake and Samantha own a general store. They report on their application that the total value of their self-employment assets exceeds $200,000.
Contact Jake and Samantha to clarify information about their self-employment assets. Jake reports the total value of their business assets is $340,000, which includes the business property, two business vehicles, a business bank account, and the store's inventory. He also states the business property has an encumbrance of $125,000 that he did not include in his calculation of the self-employment assets' value. Jake and Samantha's self-employment asset total is recalculated to be $215,000 ($340,000 - $125,000). Only $200,000 of the clients' $215,000 self-employment asset total can be excluded. Count the remaining $15,000 toward the client's asset total.
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MA Method B, MA-EPD and MSP
Exclude all assets of a trade or business, regardless of value, that are in current use and needed for a client to earn income.
Note: Current use may include seasonal use.
l The excluded assets can be real or personal property, including liquid assets.
l There is no limit to the amount of assets to exclude for this provision.
l Clients must identify self-employment assets. Request a statement from the client containing:
n A description of the business and the business assets(s).
n The number of years the business has been operating.
Do not require verification unless there is inconsistent information.
l Allow an exemption for assets not in current use for reasons beyond the client’s control if the client expects to resume use within one year. To qualify for the exemption, the client must sign a statement indicating:
n The reason the property is not in use.
n The date the property was last used.
n When the property is expected to be used again.
l Extend the exclusion for an additional one year if the nonuse is due to a disabling condition. To qualify for the extension the client must sign a statement indicating:
l The nature of the disabling condition.
l When the activity ceased.
l When the property is expected to be used again.
Sylvia, age 72, is a self-employed cosmetic home sales representative. She has an unsold inventory of $12,000.
Exclude the unsold inventory as a trade or business asset because it is needed to earn income. Do not count the value of the inventory toward her asset limit.
Salvador, age 66, is self-employed as a handyman. He has plumbing tools with a net value of $2,000, construction machinery with a net value of $10,000, a mini-van with a net value of $8,000, and a checking account for the business with a balance of $3,000. Unfortunately, Salvador fell from a ladder when putting up a light fixture. He provided a signed statement indicating he has a broken leg and a broken arm from his fall on January 5 and that he should be able to return to handyman status on May 8.
Salvador’s total business assets are worth $23,000, well over his $3,000 asset limit. Because all of these assets are used for his self-employment business they are excluded and will continue to be excluded because he will be returning to work within a year.
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