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:

The annuity is a deferred annuity in the accumulation phase. An annuity in the accumulation phase is evaluated as an available asset.
Revocable or assignable annuities are evaluated as an available asset. See Medical Assistance for People Who Are Age 65 or Older and People Who Are Blind or Have a Disability (MA-ABD) Annuities for information on verifying these annuities.
The annuity is an employer sponsored retirement fund. See MA-ABD Retirement Funds and Retirement Plans for more information.
Annuities that meet a transfer exception are not evaluated for a transfer penalty; however, any annuity that meets an exception is evaluated for availability. See MA-ABD Annuities for more information.

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.

An annuity is evaluated to determine if an uncompensated transfer occurred if it includes all the following elements:

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 within the lookback period. See EPM section 2.4.1.4.1 MA-LTC Annuity Disclosures for the definition of an annuity transaction.
The annuity is in the annuitization phase.

For annuities that include these elements, an uncompensated transfer occurred 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.
- If either, or both, of these criteria are not met the value of the uncompensated transfer is the total amount of funds annuitized less any payments the person or his or her spouse already received.
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.
- If this criteria is not met, the value of the uncompensated transfer is the total amount of the funds annuitized that will not be returned to the person requesting MA-LTC, or the person's spouse, within the applicable life expectancy.

An uncompensated transfer also occurred if the ownership interest or payments the person or their spouse were entitled to receive is transferred or assigned 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 amount of the uncompensated transfer is the value of the remainder interest, at the time the life estate was established, less any compensation received. See MA-ABD Life Estate and Remainder Interests.
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

A trust that meets the legal requirements to be considered a valid pooled trusts is unavailable for purposes of MA eligibility. See EPM section 2.3.3.2.7.9.5 MA-ABD Pooled Trusts for more information. However, funds entering and leaving a pooled trust while a person is receiving MA-LTC or during the lookback period must be evaluated to determine if an uncompensated transfer occurred.

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

The establishment or addition to pooled trust after the applicant or enrollee reaches age 65 is an uncompensated transfer unless a transfer penalty exception applies. A transfer penalty exception applies if the trust beneficiary intended to receive valuable consideration for the transferred asset or income. Valuable consideration is compensation that is approximately equal to the fair market value of the transferred asset or income.

To show that the valuable consideration exception applies, the applicant or enrollee must provide documentation that describes how the trust beneficiary intends that the trustee make disbursements from the trust sub-account. The documentation must show to the agency’s satisfaction that:

The trust beneficiary intends that the trustee disburse all funds transferred to the trust sub-account within the trust beneficiary’s expected lifetime as determined by the Social Security Administration’s Actuarial Life Table;
The trust beneficiary intends that the trustee make disbursements for goods, services or trust fees and expenses in amounts that are reasonable and customary; and
The trust beneficiary intends that the trustee make disbursements only for goods and services for the benefit of the beneficiary that are not otherwise covered by MA.

If, after reviewing the documentation, the agency determines that the trust beneficiary intended to receive valuable consideration in exchange for the amount transferred to the pooled trust sub-account, the applicant or enrollee has met the valuable consideration intent exception and no penalty may be imposed.

If the applicant or enrollee does not provide documentation or if, after reviewing the documentation provided, the applicant or enrollee does not show to the agency’s satisfaction that the trust beneficiary intended to receive valuable consideration in exchange for the transfer, then the agency must impose a penalty based on the uncompensated amount of the transfer. The uncompensated amount may include any of the following components:

Any amount for which the documentation provided lacks specificity sufficient to determine for what goods, services, or trust fees and expenses the trust beneficiary intends for the trustee to make disbursements, the amount of those intended disbursements, and when those disbursements are intended to occur;
Any amounts the trust beneficiary intends the trustee to disburse for goods, services or trust fees and expenses that are not reasonable and customary;

Examples:
- Where the trust beneficiary intends that the trustee disburse funds to pay $75 per day for a private room in a nursing facility, and the fair market value for a private room is $30 per day, the uncompensated amount is equivalent to $45 per day.
- Where the trust beneficiary intends that the trustee disburse $3,000 for adaptive equipment not covered by MA, and the fair market value of the adaptive equipment is $2,000, the uncompensated amount is $1,000.

Any amount the trust beneficiary intends that the trustee disburse after the beneficiary’s expected lifetime as measured in accordance with the SSA’s Actuarial Life Table; or
Any amount that the trust beneficiary intends that the trustee disburse for goods or services that are covered by MA.

The “Pooled Trust Transfer Evaluation Worksheet” (DHS-8144) may be used to assist in evaluating any documentation that is provided by the applicant or enrollee.

The agency must follow ONEsource procedures, “Evaluating Transfers to a Pooled Trust for MA-LTC and AC” to evaluate transfers to a pooled trust sub-account by a person age 65 or older who is applying for or enrolled in MA-LTC.

Legal Citations

Minnesota Statutes, section 256B.056

Minnesota Statutes, section 256B.0595

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

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

Pfoser v. Harpstead, 953 N.W.2d 507 (Minn. 2021)