Current through Register Vol. 48, No. 38, September 20, 2024
The provisions in this Section are intended to comport with
federal requirements related to transfers of assets, in particular,
requirements under
42 USC
1396 p and guidance from the US Department of
Health and Human Services related to those statutory requirements.
Interpretation and application of this Section shall be made in light of those
requirements.
a) General. A transfer
of assets for less than fair market value made on or after January 1, 2007 by
an institutionalized person or the spouse of that person within 60 months
before the later of applying for medical assistance or transferring an asset
shall result in a period of ineligibility for long term care services for that
person.
b) Long term care services
are defined as:
1) services provided in a
long term care facility as that institution is defined in Section
120.61(a);
and
2) services provided under a
home and community based waiver authorized under
42 USC
1396 n(c) or (d) and specified in 42 CFR 441
Subpart G or H.
c)
Institutionalized individuals or persons are defined as:
1) persons residing in long term care
facilities, including those who were residing in the community at the time a
transfer of assets was made; or
2)
persons who, but for the provision of home and community based waiver services
(
42 USC
1396 a(a)(10)(A)(ii)(VI)), would require the
level of care in a long term care facility, including those persons receiving
home and community based waiver services who were not receiving the services at
the time a transfer of assets was made.
d) Assets.
1) For purposes of this Section, the term
"assets" or "property" includes all income (as defined in
42 USC
1382 a) and resources (as defined in
42 USC
1382 b, except subsection (a)(1) of that
section, which excludes the home as a resource) of an institutionalized person
and that person's spouse, including, but not limited to: cash; savings
certificates; stocks; bonds; interests in real property, including mineral
rights; rights to inherited real or personal property or income; and accounts
and debts receivable.
2) Assets
also include any income or resources that the person or the person's spouse is
entitled to but does not receive because of action or inaction by:
A) the person or the person's
spouse;
B) a person, including a
court or administrative body, with legal authority to act in place of or on
behalf of the person or the person's spouse;
C) any person, including any court or
administrative body, acting at the direction or upon the request of the person
or the person's spouse; or
D) any
person who acted (or failed to act) to avoid receiving assets to which the
person was entitled.
3)
Examples of actions that would cause assets not to be received include:
A) Irrevocably waiving pension
income;
B) Waiving the right to
receive an inheritance;
C) Not
accepting or accessing injury settlements;
D) Arranging for a defendant in a civil
action to divert a settlement amount into a trust or similar device for the
benefit of the person, who is a plaintiff in the case;
E) Refusing to take legal action to obtain a
court-ordered payment that is partially or wholly unpaid, such as alimony;
or
F) Receiving an inheritance
under a will when renouncing the will and taking a statutory share (see
755 ILCS
5/2-8) is more advantageous. Alternately, renouncing a
will and taking a statutory share when taking the inheritance is more
advantageous.
4) Failure
to take action to receive an asset is not considered a transfer for less than
fair market value when evidence is submitted showing the cost of obtaining an
asset exceeds the value of the asset.
e) Transfer. A transfer of assets occurs when
an institutionalized person or an institutionalized person's spouse buys, sells
or gives away real or personal property or changes (e.g., a change from joint
tenancy to tenancy in common) the way property is held.
1) Changing ownership of property to a life
estate interest is an asset transfer (the value of the life estate and
remainder interest is determined as described in Section
120.380(i)
and 89 Ill. Adm. Code
113.140(e)
) .
2) Transactions involving annuities,
including the purchase of an annuity or any action by a person that changes the
course of payments to be made by the annuity or the treatment of income or
principal of the annuity, are considered transfers under this Section. Such
actions include, but are not limited to, additions of principal, elective
withdrawals, requests to change the distribution of the annuity, elections to
annuitize the contract and any action intended to make an annuity irrevocable
or nonassignable.
3) For property
held in joint tenancy, tenancy in common or similar arrangement, a transfer
occurs when an action by any person reduces or eliminates the person's
ownership or control of the property.
4) A transfer of income in the month it is
received is considered a transfer of assets if the income would have been
considered an asset in the following month as provided under Section
120.380(d)(1).
A transfer of the proceeds of a loan in the month received is considered a
transfer of assets.
f)
Fair market value (FMV) is an estimate of the value of an asset if sold at the
prevailing price at the time it was actually transferred. Prevailing price is
what property would sell for on the open market between a willing buyer and a
willing seller, with neither being required to act and both having reasonable
knowledge of the relevant facts.
1) In
determining if FMV has been received for an asset, the Department shall use all
reasonable means available and consider all relevant facts and circumstances
relating to the asset and the transaction, including, but not limited to: the
cost or price paid for the asset, whether the transaction was at arm's length,
comparable sales, replacement cost, and expert opinion. In determining the FMV
of farmland in Illinois, the Department may take into account market values
determined under methodologies developed by the University of Illinois College
of Agricultural, Consumer and Environmental Sciences.
2) For an asset to be considered transferred
for FMV, the compensation received for the asset must be in a tangible form
with intrinsic value that is roughly equivalent to or greater than the value of
the transferred asset.
3) Transfers
of assets for "love and affection" are not considered transfers for FMV. A
transfer to a friend, family member or relative for care provided for free in
the past is a transfer of assets for less than FMV. The Department presumes
that services, care or accommodations rendered to a person by a friend or
family member are gratuitous and without expectation of compensation. This
presumption may be rebutted by credible documentary evidence that preexists the
delivery of the care, services or accommodations showing the type and terms of
compensation and contemporaneous receipts, logs or other credible documentation
showing actual delivery of the care or services claimed. Compensation paid in
excess of prevailing rates for similar care, services or accommodations in the
community shall be treated as a transfer for less than FMV.
4) "Compensation received" is the amount of
money or value of any property or services received in return for the
institutionalized person's assets. The compensation received may be in the form
of:
A) Cash;
B) Other assets such as promissory notes,
stocks, bonds, and both real estate contracts and life estates that are
evaluated over an extended time period;
C) Discharge of a debt;
D) Prepayment of a bona fide and irrevocable
contract, such as a mortgage, shelter lease, loan or prepayment of
taxes;
E) Services; and
F) Any other act, object, service or other
benefit that has tangible or intrinsic economic value to the person.
5) The term "uncompensated value"
means the difference between the FMV of a transferred asset (less any
outstanding loans, mortgages, or other encumbrances on the asset) and the
actual compensation received. Only the uncompensated value of a transferred
asset is subject to the penalty provisions described in this Section.
g) Look Back Period. The
provisions of this Section apply to any asset transfers occurring on or after
January 1, 2007, and before the date on which the person is an
institutionalized person (as defined in subsection (c) of this Section) and has
applied for medical assistance.
h)
Penalty. If a person transfers assets for less than fair market value, the
person is subject to a period of ineligibility for long term care services. The
penalty period is determined in accordance with subsection (j) of this Section.
If otherwise eligible, persons subject to a penalty remain eligible for all
covered medical services except long term care services.
i) Penalty Period.
1) A penalty period under this Section:
A) begins with the later of:
i) the first day of a month during which a
transfer for less than FMV is made; or
ii) the date on which the person is eligible
for medical assistance and would otherwise be receiving long term care services
(based on an approved application for those services) were it not for the
imposition of the penalty period. A person is not considered eligible and
services are not considered capable of being received under this subsection (i)
until any spenddown is met; and
B) does not occur during any other period of
ineligibility under this Section.
2) A notice of penalty period shall include a
statement that the person may appeal the penalty period pursuant to 89 Ill.
Adm. Code
102.80.
j) Penalty Calculation. A penalty
period is determined based on the uncompensated value of transfers. The penalty
period is calculated by dividing the total uncompensated value of assets
transferred by the average monthly cost of long-term care services at the
private rate in the community in which the person is institutionalized at the
time of application. The result is the penalty period in number of months, days
and portion of a day (e.g., $65,000/$4000 = 16.25 = 16 months and 7.5 days).
The Department will not round down or otherwise disregard any period of
ineligibility calculated under this subsection.
k) Multiple Transfers. Multiple,
non-allowable transfers made during the look-back period shall be cumulated and
treated as a single transfer. A single period of ineligibility shall be
calculated based on the total uncompensated value of the transfers. Once a
penalty period is imposed, it continues to run without regard to whether the
person continues receiving long term care services.
l) When transfers by a community spouse
result in a penalty period for the institutionalized spouse and the community
spouse subsequently becomes institutionalized and is otherwise eligible for
medical assistance, the Department shall divide any remaining penalty period
equally between the spouses. If one spouse predeceases the other before the
penalty period has ended, the remaining penalty period will be added to the
surviving spouse's penalty.
m) A
person shall not be subject to a penalty period under this Section to the
extent that:
1) homestead property was
transferred to:
A) the person's
spouse;
B) the person's child who
is under age 21;
C) the person's
child who is determined blind (as described in Section
120.313) or determined
disabled (as described in Section
120.314);
D) the person's brother or sister who has an
equity interest in the homestead property and who was residing in the home for
at least one year immediately prior to the date the person became
institutionalized; or
E) the
person's son or daughter who provided care for the person and who resided in
the homestead property for the two years immediately prior to the date the
person became institutionalized provided credible tangible evidence is
presented that:
i) shows the person was in
need of care that would have otherwise required an institutional level of care.
The evidence may consist of a physician's statement or an evaluation conducted
by a medical professional showing the need for an institutional level of care.
A diagnosis of Alzheimer's or other dementia related illness shall be prima
facie evidence of a need for an institutional level of care; and
ii) shows the son or daughter resided with
the person for two years immediately prior to the person's
institutionalization. The evidence may consist of tax returns, driver's
license, cancelled checks or other documentation demonstrating residence in the
home for at least two years prior to the parent's institutionalization;
and
iii) shows the son or daughter
provided care to the person that prevented institutionalization. The evidence
may consist of sworn affidavit or statement signed by the son or
daughter.
2)
the transfer:
A) by the institutionalized
person was to:
i) the person's spouse or to
another person for the sole benefit of the person's spouse;
ii) the person's child or to a trust
(including a trust described in Section
120.347(d)
) established solely for the benefit of the person's child or to another person
for the sole benefit of the institutionalized person's child. To qualify under
this subsection (m)(2)(A)(ii), the child must be determined blind (as described
in Section 120.313) or determined disabled (as described in Section
120.314);
iii) a trust (including
trusts described in Section
120.347(d)(1)
and (2)) established solely for the benefit
of a person who is determined disabled (as described in Section
120.314).
B) "sole
benefit of" a person means:
i) the transfer
is arranged in such a way that no person or entity except the specified
beneficiary can benefit from the property transferred;
ii) the transfer instrument or document
provides for the spending of the funds involved for the benefit of the person
on a basis that is actuarially sound, based on the life expectancy of the
person involved (as determined under current actuarial tables published by the
Office of the Chief Actuary of the Social Security Administration
http://www.ssa.go/OACT/STAT/table4c6.html).
Equal and periodic payments are not required. This subsection (m)(2)(B)(ii)
does not apply to trusts described in Section
120.347(d)
because those trusts provide for a "payback"
to the State upon the death of the beneficiary;
iii) the transfer was accomplished via a
written instrument of transfer (e.g., a trust document) that legally binds the
parties to a specified course of action and clearly sets out the conditions
under which the transfer was made, as well as who can benefit from the
transfer. A transfer without such a document may not be said to have been made
for the sole benefit of the person since there is no way to establish, without
the document, that only the specified person will benefit from the
transfer.
3)
the person intended to transfer the property for fair market value (FMV). When
a transfer is made for less than FMV, a person is presumed to have done so
intentionally. This presumption may be rebutted by objective tangible evidence
of the following (a subjective statement of intent or claim of ignorance of the
asset transfer provision is not sufficient):
A) initial and continuing reasonable, good
faith efforts to sell the property on the open market were made and that the
compensation received was the best value offered;
B) a legally binding contract was executed
that provided for adequate compensation in a specified form (e.g., goods,
services, cash) in exchange for the transferred asset;
C) the person acted in good faith that he or
she was receiving FMV or the best price for the item or property, and the item
or property was transferred to a person other than a related party (e.g., a
person related by blood, marriage or friendship);
D) the person had other adequate means or
plans for support, including medical care, at the time of the
transfer.
4) the
transfer was made exclusively for a reason other than to qualify or remain
eligible for medical assistance. A transfer for less than FMV is presumed to
have been made to qualify for assistance. This presumption may be rebutted by
credible tangible evidence that the person or spouse had no reason to believe
that Medicaid payment of long term care services might be needed. The sudden
loss of income or assets, the sudden onset of a disabling condition, such as a
stroke or Alzheimer's disease, or a personal injury may provide convincing
evidence that there was no reason to anticipate a need for long term care
assistance. A subjective statement of intent or claim of ignorance of the asset
transfer provision is not sufficient. Other examples of credible evidence
showing a reason for transferring assets for reasons other than to qualify or
remain eligible for medical assistance include, but are not limited to:
A) police reports, other related law or
regulatory enforcement reports, documentation from the Department on Aging, or
like credible evidence that assets were misappropriated as a result of elder or
other abuse and cannot be recovered;
B) evidence that the transfer was made by a
person lacking the mental capacity to make the transfer and who was not
represented by a guardian, family member or other legal representative at the
time of the transfer.
C) evidence
that the transfers were for everyday living expenses, incidental gifts to
family members, or contributions to charities or religious organizations made
on a consistent basis over a period of time (not only in close proximity to
applying for assistance). These expenses shall be reviewed taking into account
the individual circumstances of a particular transfer and applying an objective
standard based on whether a reasonable person would have made the transfer
unmotivated by an intent to qualify for assistance; and
D) other evidence pertinent to the person's
circumstances at the time of the transfer relating to:
i) the person's physical and mental
condition;
ii) the person's
financial situation;
iii) the need
for medical assistance;
iv) any
changes in living arrangements;
v)
the length of time between the transfer and application for medical assistance;
or
vi) whether unexpected events
occurred between the transfer and application.
5) the person transfers property disregarded
as a result of payments made by a qualified long term care insurance policy
approved by the Director of the Illinois Department of Insurance under the
Qualified Long Term Care Insurance Partnership (QLTCIP) program (50 Ill. Adm.
Code 2012).
6) the assets
transferred for less than FMV have been returned to the person.
A) For transfers occurring prior to January
1, 2012, if only parts of transferred assets are returned, a penalty period
shall be reduced but not eliminated. For example, if only half the value of the
asset is returned, the penalty period shall be reduced by one half.
B) For transfers occurring on or after
January 1, 2012, all of the assets transferred for less than FMV must have been
returned to the person. Full or partial returns occurring prior to imposition
of a penalty reduce the uncompensated portion of the transfer by the amount
returned. Once a penalty is imposed it may only be eliminated if all assets
transferred for less than FMV are returned. When all transferred assets are
returned, the assets are treated as returned on the date the penalty was
imposed; the penalty is erased and the returned assets are treated as available
as of the date the penalty was imposed. For the time period between imposition
of the penalty and return of the assets, the Department will treat the assets
as available to meet the spenddown obligation for that time period only (see
Section
120.384) .
At the point in time that assets are in fact returned, they are treated as
available assets that may be reduced by a spenddown obligation or otherwise.
Returned assets that are transferred for less than FMV may be subject to
penalty.
7) the
Department determines that the denial of eligibility would cause an undue
hardship as provided in subsection (r) of this Section.
n) The purchase of an annuity by or on behalf
of an institutionalized person or the spouse of that person shall be treated as
a transfer of assets for less than FMV unless:
1) the annuity names the State of Illinois as
the remainder beneficiary in the first position for up to the total amount of
medical assistance paid on behalf of the institutionalized person; or
2) the annuity names the State of Illinois in
the second position after the community spouse or minor child or child with a
disability and is named in the first position if the spouse or a representative
of the child disposes of any remainder for less than FMV.
o) The purchase of an annuity by or on behalf
of an institutionalized person shall be treated as a transfer of assets for
less than FMV unless:
1) the annuity is
considered either:
A) an individual
retirement annuity described in section 408(b) of the Internal Revenue Code (
26 USC
408(b)); or
B) a deemed individual retirement account
(IRA) under a qualified employer plan described in section 408(q) of the
Internal Revenue Code (
26 USC
408(q)); or
2) the annuity is directly
purchased with proceeds from one of the following:
A) a traditional IRA described in section
408(a) of the Internal Revenue Code (
26 USC
408(a));
B) certain accounts or trusts treated as
traditional IRAs under section 408(p) of the Internal Revenue Code (
26 USC
408(p));
C) a simplified employee pension described in
section 408(k) of the Internal Revenue Code (
26 USC
408(k)); or
D) a Roth IRA described in section 408A of
the Internal Revenue Code (
26 USC
408 A); or
3) the annuity meets all the following
requirements:
A) was purchased from a
commercial financial institution or insurance company authorized under federal
or State law to issue annuities;
B)
is actuarially sound and based on the estimated life expectancy of the person
(as determined under current actuarial tables published by the Office of the
Chief Actuary of the Social Security Administration at
http://www.ssa.gov/OACT/STATS
table4c6.html). Period certain annuities that pay out over a term less than the
person's expected life shall be treated as actuarially sound;
C) is irrevocable and nonassignable;
and
D) pays benefits in
approximately equal periodic payments no less than quarterly, with no deferred
or balloon payments.
p) Life Estates. The purchase of a life
estate interest in another person's home shall be treated as a transfer for
less than FMV unless the purchaser resided in the home for at least 12
consecutive months after the date of the transfer. If the purchaser resided in
the home for less than 12 consecutive months, the entire purchase amount will
be considered a transfer for less than FMV.
q) Promissory Notes, Loans and Mortgages. The
purchase of a promissory note, loan or mortgage by a person shall be treated as
a transfer of assets for less than FMV unless the following conditions are met
(a promissory note, loan, or mortgage that does not satisfy these conditions
shall be valued based on the outstanding balance due the person under the
instrument as of the later of the date of application for medical assistance or
the date of the transfer):
1) a written
instrument recording the transaction is executed, signed and dated on the
effective date of the transaction;
2) the instrument provides for a repayment
term that is actuarially sound (as determined under current actuarial tables
published by the Office of the Chief Actuary of the Social Security
Administration at
http://www.ssa.gov/OACT/STATS/table4c6.html).
Instruments that provide for a repayment term that is less than the person's
life expectancy shall be treated as actuarially sound;
3) the instrument provides for payments to be
made in equal installments (no less than monthly) during the term of the loan
with no deferral and no balloon payments;
4) the instrument prohibits the cancellation
of the balance upon the death of a lender;
5) a tangible, verifiable record of
consistent, timely payments in the amounts provided under subsection (q)(3)
demonstrates a good faith attempt to repay the instrument. Unpaid installments
delinquent three months or more will result in the Department treating the
amount remaining unpaid on the instrument as a non-allowable transfer;
and
6) the instrument provides for
the assignment to the State of Illinois, as of the date of death, of up to the
total amount of medical assistance paid on behalf of the institutionalized
person; the State shall be placed in the first position of assignment or in the
second position after the community spouse or minor child or child with a
disability, and is named in the first position if the spouse or a
representative of the child disposes of any remainder for less than
FMV.
r) Hardship Waiver.
1) The Department shall waive a penalty
period or a portion of a penalty period if it determines that application of a
penalty creates an undue hardship. An undue hardship exists when application of
a penalty would deprive an institutionalized person:
A) of medical care, endangering the person's
health or life; or
B) of food,
clothing, shelter, or other necessities of life.
2) The person requesting a hardship waiver
shall have the burden of proof that actual, not just possible, hardship exists.
The Department may require the person to provide written evidence to
substantiate the circumstances of the transfer, attempts to recover the
uncompensated value of the transfer, reasons for the transfer and the impact of
a period of ineligibility for long term care services. The following criteria
shall be considered in determining whether a hardship waiver may be granted:
A) whether credible evidence is presented
that the person, in good faith and to the best of his or her ability, has taken
all equitable and legal means available to recover an asset or assets that have
been transferred for less than fair market value. In cases involving alleged
theft, fraud, elder abuse or other misappropriation of assets, evidence of
referrals to the police or other law or regulatory enforcement agencies is
required;
B) the medical condition,
mental capacity, financial ability and other factors that may have affected the
person at the time of the decision to transfer the assets for less than
FMV;
C) the denial of assistance
would force the person to move; and
D) subject to the availability of beds, the
person would be prohibited from joining a spouse in a facility or from entering
a facility that is in close proximity to his or her family.
3) Transfers Prior to November 1,
2011.
Notwithstanding the provisions of subsection (r)(2), and
notwithstanding the January 1, 2012 implementation date of the look back
period, for transfers occurring prior to November 1, 2011, a hardship waiver
shall be granted if the applicant signs an attestation form stating that the
penalized transfer was made in reliance on the administrative rules in effect
at the time of the transfer and that, without a waiver, the person faces
deprivation of the elements described in subsections (r)(1)(A) and (B).
4) A facility in which an
institutionalized person is residing may request a hardship waiver on behalf of
that person under this subsection (r) provided written consent has been
obtained from the person if the person is legally competent to give that
consent or from the person's personal representative, who may include the
person who signed the application for medical assistance on behalf of the
resident (see 89 Ill. Adm. Code
110.10(c)
) .
s) Records Production. The Department or its
agent may request any and all records necessary to determine the existence and
extent of any transfers of property under this Section. Persons are required to
cooperate in providing requested information and verifications in accordance
with Section
120.308. The
Department will provide any needed assistance requested by a person and will
use reasonable measures requesting records, taking into account the age,
significance, relevancy and difficulty of obtaining the records, the medical
condition and mental capacity of the person, and other factors that may affect
the person's ability to retrieve records.
t) Notice.
1) The Department shall issue a notice to any
person who is subject to a penalty period not less than 10 days prior to
imposition of the penalty. The notice shall inform the person of the period of
ineligibility for long term care services and include a statement that the
person may appeal the decision to impose a penalty period pursuant to 89 Ill.
Adm. Code 102.80.
2) A notice of
imposition of a penalty period shall inform the person that a hardship waiver
under subsection (r) may be requested and that the person or facility in which
the person resides may submit in writing (pursuant to subsection (r)(2))
evidence that a hardship exists. The evidence may be submitted to the
Department, which shall review the information and, based on the criteria under
subsection (r), determine whether a hardship waiver should be granted. Upon
completion of its review, the Department shall issue a notice of decision on a
request for a hardship waiver that shall include a statement that the person
may appeal the decision pursuant to 89 Ill. Adm. Code 102.80.
