Medical Assistance for Long-Term Care Services

2.4.1.3 Uncompensated Transfers

The transfer of an asset or income without adequate compensation, known as an uncompensated transfer, may result in a period of ineligibility for Medical Assistance for Long-Term Care Services (MA-LTC). The transfer of an asset or income is assumed to be for the purpose of obtaining or maintaining eligibility for MA-LTC unless the person provides convincing evidence that proves otherwise. County, tribal, or state agency workers must only evaluate transfers that are disclosed on an application or are discovered through a fraud investigation.

The period of ineligibility that may result due to an uncompensated transfer is known as a transfer penalty, and occurs if all of the following apply:

the transfer was made by any of the following people:
- The person
- The person’s spouse
- A person’s authorized representative acting on behalf of the person or the person’s spouse
- A court or administrative body acting at the direction of the person or the person’s spouse
- A court or administrative body with legal authority to act in place of the person or the person’s spouse
The transfer occurred within the lookback period or while the person is receiving MA-LTC,
The person did not receive adequate compensation, and
No transfer penalty exception applies.

Transactions that occur outside the lookback period are not evaluated and are not subject to transfer penalties.

This section of the manual details the uncompensated transfer.

Transfer of Ownership

A transfer occurs when a person or the person's spouse gives away, sells, conveys ownership, and/or reduces control, or disposes of any asset or income or an interest in an asset or income.

Uncompensated transfers may include, but are not limited to:

Transferring an interest in a life estate to another person
Establishing an interest in a life estate
Annuitizing an annuity
Transferring assets or income into a client-funded trust
Transferring assets or income into a special needs or pooled trust after the person turns age 65
Assigning the right to an income stream to another person
Reducing or eliminating ownership or control of income or assets held in common with another person or persons
Placing an asset into joint ownership with another person thereby reducing or eliminating ownership, interest, control or right to sell or dispose of an asset
Any action that results in a person giving up the right to income or assets to which the person is entitled, unless:
- The person cannot afford to take action to obtain the asset or income.
- The cost of taking the action is more than the asset or income is worth. Examples of this type of transfer include:
  - Refusing to accept an inheritance or testamentary gift, unless the costs associated with accepting it exceed the value of the gift.
  - A spouse’s refusal to take an action to receive his or her elective share of a spouse’s estate when the value of the elective share is greater than the provisions for the surviving spouse in a will.
Waiving pension income or diverting it to a trust or similar device for the benefit of another
Refusing to take affordable legal action to obtain court-ordered payments that are not being paid, such as child support or spousal support
Not accepting or taking action to obtain a right to personal injury settlements
Diverting personal injury settlements by the defendant into a trust or similar legal device to be held for the benefit of the plaintiff
Certain purchases

Uncompensated transfers do not include:

A distribution of assets as directed by a court order
Any actions taken during a person's lifetime that does not result in a transfer of ownership until after the person's death including:
- Creating or modifying a transfer on death deed (TODD)
- Creating or modifying a will
- Changing a designation on a life insurance policy

Certain Purchases as Transfers

A transfer takes place when a person purchases personal care or other types of services, personal or real property, a life estate interest, or an interest in a financial arrangement such as a promissory note, loan, or mortgage. The purchase may be made with cash or with another asset that has a value equivalent to the agreed upon purchase price. When a person pays more than the fair market value (FMV) of the item they are purchasing, an uncompensated transfer may have occurred. This section discusses how to evaluate purchases under transfer rules.

Purchase of Personal Care Services

The purchase of personal care services is paying another person to provide services that aid the purchaser in performing their activities of daily living. Payment for these services is not an uncompensated transfer when:

The care or services directly benefit the person; and
The purchaser provides compensation in an amount consistent with customary fees charged for providing similar services in the community in which the purchaser resides; and
When a relative of the purchaser provides the care or services, a written and notarized agreement is in place on or before the date the care or services begin. The agreement must:
- Be signed by the person receiving the care or services and the relative(s) who will be providing the care or services
- Include an itemized list of the care or services that will be provided
- Specify the amount of time that is anticipated to be spent providing the care and services; and
- State the period of time the agreement covers.

The requirement to have a written agreement prior to services being provided is waived when compensation for the services provided by the relative(s) was made within 60 days after the services were provided.

Purchase of Other Services

The purchase of other services occurs when a person pays someone to perform services such as lawn care, snow shoveling, tax preparation, etc. These services are not an uncompensated transfer if:

The service directly benefits the person; and
The person paid an amount consistent with customary fees charged for similar services in the community in which the person resides.

Purchase of Interest in Promissory Notes, Loans and Mortgages

The purchase of an interest in a promissory note, loan, or mortgage occurs when a person buys the right to receive the payments under a contract from another person or entity. These purchases are not an uncompensated transfer if the contract meets all of the following requirements:

The terms of the contract provide for payments to be made in equal amounts.
There is no provision for deferral of payments.
There is no provision for balloon payments.
Cancellation of the balance due upon the death of the purchaser is prohibited and
The repayment terms are actuarially sound.

Repayment terms are actuarially sound if the person will receive all of the payments within their anticipated life expectancy. To determine the total amount a person expects to receive during their life expectancy, the figure that corresponds to the purchaser’s age at the time of purchase is found on the Social Security Administration (SSA) Actuarial Table, and is then multiplied by the total annual payment the purchaser will receive under the contract. If the purchase price of the interest is:

Less than or equal to the total amount the purchaser expects to receive in their anticipated lifetime, the purchase is actuarially sound and no further evaluation under transfer rules is required.
More than the amount that the purchaser expects to receive in their anticipated lifetime, the purchase is not actuarially sound. The difference between the purchase price and the total amount the purchaser can expect to receive during their anticipated lifetime (including principal and interest), is counted as the uncompensated value.

Purchase of Personal and Real Property

In general, a purchase price for personal or real property in an amount that exceeds the FMV of the personal or real property is an uncompensated transfer. The amount of the uncompensated transfer is the difference between the FMV of the personal or real property and the purchase price.

Purchase of a Life Estate Interest in Another Person’s Home

The purchase of a life estate interest in another person’s home gives the purchaser the right to occupy the property and may allow the purchaser to retain income earned by the property depending on the terms of the life estate agreement. The purchase of a life estate interest in another person’s home is evaluated to determine if an uncompensated transfer has occurred.

The purchase of a life estate in another person’s home is not an uncompensated transfer if:

The FMV was more than or equal to the purchase price; and
The person resided in the home for more than 12 consecutive months.

The purchase of a life estate in another person’s home is an uncompensated transfer if either of the following occur:

The person did not reside in the home for 12 consecutive months following the date of purchase, even if the FMV was more than or equal to the purchase price or
The FMV was less than the purchase price of the life estate interest. The uncompensated amount is the difference between the value of the life estate interest and the purchase price.

Legal Citations

Minnesota Statutes, section 256B.0595

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

Manual Letter #16.1, June 1, 2016 ( Original Version)