Section 405 IAC 2-3-1.1 - Transfer of property; penaltyAuthority: IC 12-13-7-3; IC 12-15-1-10
Affected: IC 12-15-4; IC 12-15-5; IC 12-15-39.6
Sec. 1.1.
(a) The following definitions apply throughout this section: (1) "Assets" includes the income and resources of an applicant or a member, and an applicant's or a member's spouse, including income or resources the applicant or member, or the applicant's or member's spouse, is entitled to receive but does not receive because of action by:(A) the applicant or member, or the applicant's or member's spouse;(B) a person, including a court or an administrative body with legal authority to act in place of or on behalf of the applicant or member, or the applicant's or member's spouse; or(C) a person, including a court or an administrative body acting at the direction or on the request of the applicant or member, or the applicant's or member's spouse. The term includes assets an individual is entitled to receive but does not receive because of failure to take action subject to subsection (j).
(2) "Individual" means an applicant or a member of Medicaid.(3) "Institutionalized individual" means an applicant or a member who is:(A) an inpatient in a nursing facility;(B) an inpatient in a medical institution for whom payment is made based on a level of care provided in a nursing facility; or(C) receiving home and community based waiver services.(4) "Net income" means the income produced by real property after deducting allowable expenses of ownership. Allowable and nonallowable expenses are as follows: (A) The following are allowable expenses of ownership if the owner is responsible for the expenses: (iii) Repairs and maintenance.(iv) Advertising expenses.(vii) Trash removal expenses.(viii) Snow removal expenses.(x) Other expenses of ownership allowed by the Supplemental Security Income program.(B) The following are nonallowable expenses of ownership:(ii) Payments on mortgage principal.(iii) Personal expenses of the owner.(v) Capital expenditures.(5) "Noninstitutionalized individual" means an applicant or a member receiving any of the following services: (A) Home health care services.(B) Home and community care services for functionally disabled elderly individuals.(C) Personal care services as defined in 42 U.S.C. 1396a(a)(24).(6) "Qualified long term care insurance policy" has the meaning set forth in 760 IAC 2-20-30.(7) "Uncompensated value" means the difference between the fair market value of an asset and the value of the consideration received by an applicant or a member in return for transferring the asset.(b) A look back date is sixty (60) months before the first date as of which an individual both: (1) is an institutionalized individual; and(2) has applied for Medicaid.(c) If an applicant or a member of Medicaid, or the spouse of an applicant or a member, disposes of assets for less than fair market value on or after the look back date, the applicant or member is ineligible for Medicaid for services described in subsection (e) for a period of time known as the penalty period, which is equal to the number of months specified in subsection (g), and begins on the later of the first day of the month in which assets have been transferred for less than fair market value, or the date on which the individual is eligible for services described in subsection (e), based on an approved application for assistance without regard to penalty periods, whichever is later, and does not occur during any other period of ineligibility.(d) A transfer of assets includes cash, liquid assets, or property transferred, sold, given away, or otherwise disposed of as follows:(1) Transfer includes the total or partial divestiture of control or access, including any of the following: (A) Converting the asset from individual to joint ownership.(B) Relinquishing or limiting an applicant's or a member's right to liquidate or sell the asset.(C) Disposing of a portion or partial interest in the asset while retaining an interest.(D) Transferring the right to receive income or a stream of income, including income produced by real property.(E) Renting or leasing real property.(F) Waiving the right to receive a distribution from a decedent's estate, or failing to take action to receive a distribution that an individual is entitled to receive by law subject to subsection (j).(G) For transactions converting funds to purchase a promissory note, loan, or mortgage unless the note, loan, or mortgage:(i) has a repayment term actuarially sound under the actuarial publications of the Social Security Administration;(ii) provides for payments to be made in equal amounts during the term of the loan, with no deferral and no balloon payments made; and(iii) prohibits canceling the balance upon the death of the lender.(H) For the purchase of a life estate interest in another individual's home, unless the purchaser resides in the home for a period of at least one (1) year beginning immediately after the date of purchase.(2) If an applicant or a member relinquishes ownership or control over part of an asset, but retains ownership, control, or an interest in the remaining part, the part relinquished is considered transferred.(3) A transfer of an applicant's or a member's assets completed by the applicant's or member's power of attorney or legal guardian is considered a transfer by the applicant or member.(4) For purposes of this section, if an asset is held by an individual in common with another person or persons in a joint tenancy, tenancy in common, or similar arrangement, the asset, or the affected part of the asset, is considered transferred by an applicant or a member when an action is taken, either by the applicant or member or by any other person, that reduces or eliminates the applicant's or member's ownership or control of the asset.(5) This section applies without regard to the exclusion of the home described in 42 U.S.C. 1382b(a)(1).(6) This section applies without regard to the exclusion of income-producing real property, except for property used in a trade or business. The transfer of income-producing real property other than property used in a trade or business is subject to penalty under subsections (h) and (l). For purposes of this section, "trade or business" means a trade or business actively managed or operated by an applicant or a member.(7) Except for the allowable transfer of assets described in 42 U.S.C. 1396p(c)(2), in all instances, the office must presume the transfer of assets occurred to become Medicaid eligible unless an individual can prove otherwise.(8) The following requirements apply for verification of transfers: (A) A determination by the office at the time of the application, renewal, or anytime on the discovery of a transfer whether an individual executed an improper transfer.(B) The office is informed by an individual within ten (10) days of a transfer of assets or discovery of a transfer of assets.(C) The office is provided with documentation by an individual verifying a transfer and the details of any exchanges or transactions.(e) During the penalty period, an institutionalized individual is ineligible for Medicaid for the following services:(1) Nursing facility services.(2) A level of care in an institution equivalent to that of nursing facility services.(3) Home or community based waiver services.(f) If an individual is ineligible for Medicaid for services under this section, expenses for those services are not allowable medical expenses in calculating an individual's nursing home liability for a month of Medicaid eligibility.(g) The number of months of ineligibility is equal to the total, cumulative uncompensated value of assets transferred by an individual, or an individual's spouse, on or after the look back date specified in subsection (b), divided by the average monthly cost to a private patient of nursing facility services in the geographic area, including the county where the individual resides at the time of application. As used in this subsection, "geographic area" means the region identified in Section 2640.10.35.20 of the Family and Social Services Administration Program Policy Manual for Cash Assistance, Food Stamps, and Health Coverage. If, in calculating the period of ineligibility a fractional period of ineligibility is determined, the state shall not round down or otherwise disregard any fractional period of ineligibility.(h) This subsection applies to the transfer of a stream of income, including the transfer of the income generated by incomeproducing real property. The uncompensated value of income transferred is determined by calculating the greater of the: (1) fair market value; or(2) actual amount; of total net income the property or other source of income is capable of producing during the lifetime of the transferor, based on life expectancy tables published by the office, and subtracting the income, if applicable, the transferor receives from the property or other source of income after the transfer.
(i) When an individual accepts a rental payment that is less than the fair market rental value for income-producing property, the uncompensated value of the transfer is determined by: (1) calculating the difference between the fair market rental value and the amount of rent accepted; and(2) multiplying the difference by the person's life expectancy based on life expectancy tables published by the office.(j) This subsection applies to a transfer of assets resulting from failure to take action to receive assets to which one is entitled to receive by law. No penalty is imposed if any of the following circumstances apply: (1) An applicant or a member, or an individual with legal authority to act on behalf of an applicant or a member, does not know of their right to receive assets, or knows of the right to receive assets after the deadline for taking action has passed. If the office notifies the applicant or member of their right to receive assets before the deadline for taking action, the individual is presumed to know of their right to receive assets unless subdivision (2) applies.(2) A physician states an applicant or a member is not capable of taking action to receive the assets, and there is no guardian or other individual with the authority to act on the applicant's or member's behalf.(3) The expenses of collecting the assets exceeds the value of the assets.(4) If a surviving spouse fails to take a statutory share of a deceased spouse's estate, no penalty is imposed if the deceased spouse has made other equivalent arrangements to provide for a spouse's needs. As used in this subdivision, "other equivalent arrangements" includes a trust established for the benefit of the surviving spouse.(k) An applicant or a member remains eligible for Medicaid under this section if any of the following apply: (1) Assets transferred were a home, and title to the home was transferred to any of the following persons: (A) The spouse of the applicant or member.(B) A child of the applicant or member who is:(i) less than twenty-one (21) years of age; or(ii) blind or disabled as defined in 42 U.S.C. 1382c.(C) A sibling of the applicant or member who:(i) has an equity interest in the home; and(ii) was residing in the applicant's or member's home for a period of at least one (1) year immediately before the date the applicant or member becomes an institutionalized individual.(D) A son or daughter of the applicant or member, other than a child described in clause (B), who: (i) was residing in the applicant's or member's home for a period of at least two (2) years immediately before the date the applicant or member becomes an institutionalized individual; and(ii) the office determines has provided care to the applicant or member permitting the applicant or member to reside at home rather than in an institution or facility.(2) Assets were transferred to: (A) the applicant's or member's spouse; or(B) another person for the sole benefit of the applicant's or member's spouse.(3) Assets were transferred from the applicant's or member's spouse to another person for the sole benefit of the applicant's or member's spouse.(4) Assets were transferred to:(A) the applicant's or member's child who is disabled or blind as defined in 42 U.S.C. 1382c; or(B) a trust, including a trust described in section 22(i) of this rule, established solely for the benefit of the applicant's or member's child who is disabled or blind as defined in 42 U.S.C. 1382c.(5) Assets were transferred to a trust, including a trust described in section 22(i) of this rule, established solely for the benefit of an individual less than sixty-five (65) years of age who is disabled as defined in 42 U.S.C. 1382c.(6) Assets transferred are disregarded for eligibility purposes through the use of a qualified long term care insurance policy under IC 12-15-39.6. If an asset is disregarded through the use of a qualified long term care insurance policy, that asset and any income generated by that asset may be transferred without penalty.(7) A satisfactory showing is made to the office, under the standards specified under 42 U.S.C. 1396p(c)(2)(C) by the Secretary of Health and Human Services, that: (A) the applicant or member intended to dispose of the assets at fair market value or for other valuable consideration;(B) the assets were transferred exclusively for a purpose other than to qualify for Medicaid; or(C) assets transferred for less than fair market value have been returned to the applicant or member. To establish that a transfer is made exclusively for purposes other than qualifying for Medicaid, the applicant or member shall submit sufficient evidence to show the transfer is made exclusively for reasons not related to Medicaid eligibility, estate recovery, or a lien.(8) The office may waive the application of this section in cases of undue hardship, but only to the extent required by standards specified under 42 U.S.C. 1396p(c)(2)(D) by the Secretary of Health and Human Services and section 24 of this rule.(l) For transfers of income-producing real property not used in a trade or business on and after July 1, 2003, six thousand dollars ($6,000) of the equity value may be transferred without penalty if the transferred property produces an annual income of at least three hundred sixty dollars ($360). If the equity value of the property is less than six thousand dollars ($6,000), the property may be transferred without penalty if the property produces an annual income of at least six percent (6%) of the equity. This six thousand dollar ($6,000) exemption is a single, one (1) time exemption applying to the total value of the income-producing real property transferred by an applicant during the applicant's lifetime. If the property does not produce an annual income of at least six percent (6%) of the lesser of six thousand dollars ($6,000) or the equity value, the entire equity is the uncompensated value.(m) If a transfer by the spouse of an applicant or a member results in a period of ineligibility for Medicaid, the office apportions the period of ineligibility, or any part of that period, between the applicant or member and the applicant's or member's spouse, if the spouse otherwise becomes eligible for Medicaid, as specified in regulations adopted under 42 U.S.C. 1396p(c)(4) by the Secretary of Health and Human Services.Office of the Secretary of Family and Social Services; 405 IAC 2-3-1.1; filed May 1, 1995, 10:45 a.m.: 18 IR 2223; errata filed Jun 9, 1995, 2:30 p.m.: 18 IR 2796; readopted filed Jun 27, 2001, 9:40 a.m.: 24 IR 3822; filed Mar 13, 2002, 10:09 a.m.: 25 IR 2472; filed Apr 8, 2004, 3:16 p.m.: 27 IR 2479; readopted filed Sep 19, 2007, 12:16p.m.: 20071010-IR-405070311RFA; filed Aug 18, 2009, 11:33 a.m.: 20090916-IR-405080325FRA; readopted filed Oct 28, 2013, 3:18 p.m.: 20131127-IR-405130241RFAReadopted filed 11/13/2019, 11:54 a.m.: 20191211-IR-405190487RFAFiled 6/11/2021, 2:35 p.m.: 20210707-IR-405190602FRAFiled 6/26/2024, 10:03 a.m.: 20240724-IR-405230819FRA