19.40.45 Ending a Transfer Penalty

*** The Health Care Programs Manual (HCPM) has been replaced by the Minnesota Health Care Programs Eligibility Policy Manual (EPM) as of June 1, 2016. Please refer to the EPM for current health care program policy information. ***

Ending a Transfer Penalty

This section describes the policy for ending an imposed transfer penalty. See Waiver of Transfer Penalty for the policy on waiving a transfer penalty due to an undue hardship.

Some transfer penalties are imposed because the client or the client’s spouse refused to take an action, such as accepting an inheritance or naming DHS a preferred remainder beneficiary of certain annuities. A client can only end a transfer penalty in these situations by taking the needed action. End the transfer penalty effective no earlier than the first day of the month in which the client or the client’s spouse took the needed action.

Some transfer penalties are imposed because the client or the client’s spouse transferred assets without receiving adequate compensation. Effective with any transfer penalty imposed on or after December 1, 2011, a client can only end a transfer penalty in these situations by receiving a full return of the transferred assets. Do not redetermine a transfer penalty if assets are partially returned. A transfer penalty is imposed on the date the agency calculates a transfer penalty and sends the client a notice regarding the penalty period.

Note: Assets, in this context, refers to both income and resources of the client or the client’s spouse.

The requirement that a client receive a full return of the transferred assets in order to end a transfer penalty applies after a transfer penalty is imposed; continue to follow the standard steps in processing a transfer when determining if a client is subject to a transfer penalty. Take into account any compensation the client received when determining the amount of an uncompensated transfer prior to imposing a transfer penalty.

Ronald applied for MA. He transferred $40,000 to his son within lookback period. Ronald received $15,000 in compensation from his son.

Take into account the compensation received by Ronald when processing the transfer. The uncompensated amount of the transfer is $25,000. If Ronald is otherwise eligible for MA payment of LTC services, impose a transfer penalty based on the uncompensated amount of the transfer. Once imposed, Ronald can only end his transfer penalty by receiving a full return of the transferred assets ($25,000).

Refer to the archived section of the manual for the policy on return of assets for transfer penalties imposed prior to December 1, 2011.

A transfer penalty cannot end unless the transferor (s) receives a full return of the transferred assets. When the transferee is returning the same transferred asset, the value of the asset at the time of the return must be equal to or greater than the value of the asset at the time of the transfer in order to be considered a full return.

For non-cash transfers, the transferee has the option to substitute a cash payment in exchange for the return of the transferred asset. The amount of the cash payment must be equal to or greater than the uncompensated amount used to calculate the transfer penalty. If the value of the transferred asset has decreased or the transferee no longer has the transferred asset, the only way the transfer penalty can end is if the transferee provides a cash payment to the transferor. A transferee cannot substitute a non-cash asset in exchange for the transferred asset.

In order to return transferred assets, the transferee must make the returned asset or its cash equivalent available to the transferor. It is available if the transferor has both the legal authority and the actual ability to use the asset or to convert it to cash. A direct payment of the transferor’s obligations by the transferee (such as payment of his or her nursing home bill) is not a return of transferred assets because the assets are never actually available to the transferor.

Abigail is married to Bruce. Abigail has a transfer penalty because of the following uncompensated transfers that were made in the lookback period:

m Abigail removed herself as an owner from a parcel of land at 101 Main Street she co-owned with her sister. Bruce was not an owner of the parcel of land. The value of the land at the time of the transfer was $50,000. The uncompensated amount of the transfer was $25,000. The land is now valued at $40,000.

m Bruce transferred 100 shared of XYZ stock to his granddaughter. Abigail was not an owner of the stock. The value of the 100 shares of stock at the time of the transfer was $20,000. The uncompensated amount of the transfer was $20,000. The 100 shares of stock are now valued at $25,000.

m Abigail and Bruce transferred their homestead at 789 Elm Street to their son. They both owned the home. The value of the home at the time of the transfer was $175,000. The uncompensated amount of the transfer was $150,000 because the couple received some compensation for the home. The home is now valued at $200,000.

In order to end the transfer penalty, all of the following transactions must occur:

1. Abigail's sister must give Abigail $25,000. Abigail's sister cannot add her back as a co-owner of the land in order to end the transfer penalty because the value of the land has decreased.

2. Bruce's granddaughter can either transfer back 100 shares of XYZ stock or give Bruce $20,000.

3. Abigail and Bruce's son can either transfer back the homestead at 789 Elm Street to Abigail and Bruce or give Abigail and Bruce $150,000.

n The transferee(s) returned all of the transferred assets or their cash equivalent to the transferor(s).

n The value of the returned asset(s) at the time of the return is equal to or greater than the value of the asset(s) at the time of the transfer.

The transfer penalty cannot end unless a client has verified that all transferees have returned all transferred assets or their cash equivalent. Upon receipt of the verification, end the transfer penalty beginning the first of the month following the month of the full return.

Carol received a Long-Term Care Consultation (LTCC) on December 3 that documented she needs an institutional level of care. She applied for MA that same day. She was determined eligible for basic MA but ineligible for EW because of a transfer penalty. Carol gave her son $18,000 within her lookback period and did not receive adequate compensation. She has a 3.37 month transfer penalty that began December 1. On January 19, Carol’s authorized representative provides verification that Carol received a full return of the transferred assets on January 12.

Treat the transfer and subsequent return of an asset as a trust-like device. Consider the asset to have been available to the transferor from the point at which the transfer occurred.

For people on MA, evaluate the returned asset following standard guidelines. Excess countable assets are a barrier to ongoing eligibility. If an enrollee has excess countable assets, close MA with timely notice. Continued eligibility is possible if an enrollee reduces the excess countable assets before the effective date of closing.

For people enrolled in MA for months after the transfer occurred, follow standard program guidelines for determining overpayments.

Example:
Douglas entered an LTCF on December 5, and applied for MA the same day. He transferred $20,000 to his grandson within his lookback period and did not receive adequate compensation. Douglas was determined eligible for basic MA but ineligible for MA payment of LTC services. On December 28 you impose a 3.75 month penalty with a begin date of December 1. Douglas provides verification on February 13 that his grandson returned the $20,000 to him on February 10.

Action:
End the transfer penalty effective March 1. Consider the $20,000 to have been available to Douglas from the date of the transfer. Therefore, he had excess assets for the months of December, January and February. Determine any MA overpayments for those months. Close MA effective March 1 for excess assets. Inform Douglas that MA can continue if he reduces the excess countable assets before the effective date of closing.

A client is not automatically eligible for MA payment of LTC services upon the end of a transfer penalty. Ending the transfer penalty only eliminates a barrier for MA payment of LTC services identified in a previous request. When a transfer penalty ends, determine if the client currently meets all eligibility requirements for MA payment of LTC services.

n People not enrolled in MA when the transfer penalty ends must reapply for MA if it is outside the application processing period associated with the last completed application

n People enrolled in MA when the transfer penalty ends must submit a MHCP Request for Payment of Long-Term Care Services (DHS-3543) if they had a gap of one calendar month or more between the date the worker imposed the transfer penalty and the date of the request for MA payment of LTC services.

This is a continuation of the Douglas example above. On February 28, Douglas informs you that he reduced his excess countable assets by paying outstanding obligations, including his LTCF charges for the months of December, January and February. He provides verification that the value of his assets is now within the MA asset limits.

Reopen MA. Send Douglas an MHCP Request for Payment of Long-Term Care Services (DHS-3543) in order to determine eligibility for MA payment of LTC services. If Douglas meets the eligibility requirements, MA payment of LTC services can start March 1.

Chapter 19 - Assets	Effective: January 1, 2012
19.40.45 - Ending a Transfer Penalty	Archived: June 1, 2016