Medical Assistance for Long-Term Care Services

2.4.1.3.4 Other Asset Transfer Considerations

This section describes if a person has received adequate compensation for transfers involving the following types of assets:

  • Annuities

  • Coverdell Education Savings Account

  • Life Estates

  • Trusts

Annuities not Evaluated under the Transfer Policy

Annuities are not evaluated under the uncompensated transfer policy in the following situations:

If an annuity is not evaluated under the transfer analysis, it is evaluated to determine whether it is an available asset or if it provides unearned income.

Annuities Evaluated under the Transfer Policy

Certain annuitized annuities purchased by or on behalf of the person requesting MA for Long-Term Care (LTC) or the person’s spouse must be evaluated to determine if an uncompensated transfer occurred within the lookback period.

There are two sets of policies for evaluating these transfers: Method 1 and Method 2. Method 2 is used to evaluate annuities that do not include all of the elements of annuities evaluated under Method 1.

The policies described below do not apply to employment-based pension plans held in the form of an annuity. See Retirement Funds.

Method 1 Transfer Analysis

An annuity is evaluated under Method 1 if it meets all of the following criteria:  

  • The annuity was purchased with the funds of the person requesting MA-LTC.

  • The person requesting MA-LTC is a payee under the annuity contract.

  • An annuity transaction occurred on or after February 8, 2006 and within the lookback period.

  • The annuity is in the annuitization phase.

Annuities that meet the Method 1 transfer analysis criteria are evaluated as follows:

  1. The purchase of an annuity is an uncompensated transfer unless all of the following criteria are met:

    • The annuity is a commercial annuity

    • The annuity provides for payments in equal amounts during the term of the annuity with no deferral of payments and no balloon payments

    • The annuity is actuarially sound using the life expectancy tables published by the Chief Actuary of the Social Security Administration (SSA). The current actuarial life table is found on SSA's website.

    The value of the uncompensated transfer is the total amount annuitized less any payments the person or their spouse already received.

  2. The transfer of any ownership interest or payments, through a gift, assignment or sale, from an annuity to anyone other than the person requesting MA-LTC or their spouse may be an uncompensated transfer.

An uncompensated transfer occurred if ownership interest or payments the person or their spouse were entitled to receive is transferred to a third party without receiving adequate compensation. The amount of the uncompensated transfer is the cash value of the ownership interest or payments the person or their spouse was entitled to receive, as of the transfer date, after subtracting any compensation received.

Method 2 Transfer Analysis

An annuity is evaluated under Method 2 if it meets all of the following criteria:

  • The annuity was purchased with the funds of the person and their spouse within the lookback period

  • The person requesting MA-LTC and/or their spouse is:

    • An owner

    • A payee

    • An annuitant

    • A combination of the above

    • None of the above

      • The funds of the person and their spouse were used to purchase an annuity to benefit someone other than the person and their spouse, or someone other than the person and their spouse holds ownership of the annuity.

  • If the person requesting MA-LTC is a payee under the annuity and no annuity contract no annuity transaction occurred to the annuity on or after February 8, 2006.

  • The annuity is in the annuitization phase.

Annuities that meet the Method 2 transfer analysis criteria are evaluated as follows:

  1. The purchase of an annuity is an uncompensated transfer unless all of the following criteria are met:

    • the annuity is a commercial annuity;

    • the annuity provides for payment of principal and interest in equal monthly installments during the term of the annuity contract; and

    • principal and interest payments from the annuity begin at the earliest possible date after annuitization

    • the annuity is actuarially sound using the applicable actuarial life table.

    The value of the uncompensated transfer is the total amount annuitized less any payments the person or their spouse already received.

  2. The transfer of any ownership interest or payments, through a gift, assignment or sale, from an annuity to anyone other than the person requesting MA-LTC or their spouse may be an uncompensated transfer.

An uncompensated transfer occurred if ownership interest or payments the person or their spouse were entitled to receive is transferred to a third party without receiving adequate compensation. The amount of the uncompensated transfer is the cash value of the ownership interest or payments the person or their spouse was entitled to receive, as of the transfer date, after subtracting any compensation received.

Actuarial Soundness

An annuity is actuarially sound if the cash value, on the date it was annuitized, is less than or equal to the amount of payments the person will receive during the payee’s life expectancy. If both the person and their spouse are listed as payees under the annuity contract, the person with the longest life expectancy is used to determine actuarial soundness.

The life expectancy of the person requesting or receiving MA-LTC or their spouse is determined using the actuarial life table found on the SSA website.

Any portion of the annuity that is funded with money contributed by a third party is not included in the cash value used to determine actuarial soundness.

Coverdell Education Savings Accounts Evaluated under the Transfer Policy

Funds in a Coverdell Education Savings Account (ESA) may be transferred or “rolled over” to a member of the beneficiary’s family. When a designated beneficiary “rolls over” funds in a Coverdell ESA to a family member, the rollover must be evaluated as an uncompensated transfer.

Life Estates Interest Evaluated under the Transfer Policy

There are several instances when the transfer of a life estate must be evaluated to determine if an uncompensated transfer occurred. See Uncompensated Transfers for more information on transfer policy. See Purchases as Transfers for more information when a person purchases a life estate interest in another person's home.

A life estate must be evaluated to determine if an uncompensated transfer occurred when:

  • The life estate interest is established during the lookback period.

  • The life estate interest is sold prior to the death of the life estate owner or terminated prior to expiration under the terms of the life estate.

    • The amount of the uncompensated transfer is the value of the life estate interest on the date of the sale or  termination, less any allowable costs related to the sale of the property, and less any compensation received. See MA-ABD Life Estate and Remainder Interests.

Allowable costs of the sale of property held in life estate

Payment of a pro rata or proportional share of allowable costs related to the sale of a property held in life estate is not considered an uncompensated transfer so long as the costs are divided pro rata between the life estate owner and the remainderman. Allowable costs for the life estate owner are limited to the following:

  • Seller's closing costs, including real estate broker fees

  • Expenses required by the county or state

  • Repairs necessary for the sale

  • Buyer's closing costs, including real estate broker fees, so long as the life estate owner receives no less than two-thirds the value of the life estate interest

Payment of costs associated with making improvements (rather than repairs) to the property by the life estate owner is considered an uncompensated transfer. See MA-ABD Life Estate and Remainder Interests

Trusts Evaluated under the Transfer Policy

Client Funded Trusts

If a non-excluded asset is placed in a trust, during the lookback period or while the person is receiving MA-LTC, an uncompensated transfer takes place if the grantor is no longer able to access all or a portion of the trust income or trust corpus. The amount of the uncompensated transfer is the portion of the trust income or trust corpus that is considered unavailable.

Any distributions from the trust that are not to or for the benefit of the beneficiary are an uncompensated transfer. The amount of the uncompensated transfer is the amount of the distribution that is to or for the benefit of someone other than the beneficiary.

Special Needs Trusts

Special needs trusts are excluded assets when determining eligibility for MA. However, funds entering and leaving the trusts must be evaluated to determine if an uncompensated transfer occurred.

  • The establishment, or addition to a special needs trust before the beneficiary reaches age 65 is not considered an uncompensated transfer and a penalty cannot be imposed.

  • A distribution from a special needs trust that does not meet the sole benefit requirement is an uncompensated transfer. The amount of the uncompensated transfer is the amount of the distribution that is not for the sole benefit of the trust beneficiary.

  • A special needs trust cannot be added to after the beneficiary reaches age 65. Additions to the trust after the beneficiary reaches age 65 are not considered excluded assets. The value of any non-excluded assets added to the trust after the beneficiary reaches age 65 are considered available to the beneficiary.

See MA-ABD Special Needs Trusts for more information.

Pooled Trusts

Pooled Trusts may be considered excluded assets when determining eligibility for MA. However, funds entering and leaving the trusts must be evaluated to determine if an uncompensated transfer occurred.

  • The establishment, or addition to a pooled trust before the beneficiary reaches age 65 is not considered an uncompensated transfer and a penalty cannot be imposed.

  • The establishment of a pooled trust after the beneficiary reaches age 65 is evaluated as an uncompensated transfer. The amount of the transfer is the amount for which the beneficiary has not received adequate compensation. The beneficiary must provide proof that adequate compensation was received.

  • An addition to a pooled trust by a beneficiary or a beneficiary's spouse after the beneficiary reaches age 65 is evaluated as an uncompensated transfer. The amount of the uncompensated transfer is the amount for which the beneficiary has not received adequate compensation. The beneficiary must provide proof that adequate compensation was received.

  • A distribution from a pooled trust that does not meet the sole benefit requirement is an uncompensated transfer. The amount of the uncompensated transfer is the amount of the distribution that is not for the sole benefit of the trust beneficiary.

See MA-ABD Pooled Trusts for more information.

Legal Citations

Minnesota Statutes, section 256B.0595

United States Code, title 42, section 1396p(c)

United States Code, title 42, section 1396p(d)