A. An
encumbrance is defined as a legal obligation to pay a debt.
1. If an applicant/recipient's combined
resources exceed the resource limit, the amount of any encumbrances is deducted
from the Current Market Value (CMV) to determine the equity value of a
resource.
2. The equity value is
countable toward the resource limit.
B. Under SSI policy, an encumbrance may occur
when the applicant/recipient in an SSI-related coverage group has alleged a
check has been written from a bank account, and it has not yet cleared the
bank. If the individual has alleged a check has been written from a bank
account and it has not cleared:
1. Examine
evidence that the check was written, therefore legally obligating the funds
from the bank account.
2.
Verification must be obtained before allowing a reduced equity value of the
bank account. Once verification, is received, the equity value of the bank
account can be established by deducting the amount of the check
written.
3. Verifications needed
are a paid receipt, cancelled check, etc.
a)
Example: Mr. Timmons' bank statement shows a checking account balance of $1,250
as of May 1, which combined with other countable resources, exceeds $2000 as of
the first day of the month. Mr. Timmons alleges that the balance includes his
rent check of $500 which he wrote and gave to the landlord on April 25, but his
landlord has not yet cashed the check.
The specialist examines Mr. Timmons' check register and finds
an annotation for check number 1345 written on 4/25 for $500. He also notes
that check 1346 has already cleared the bank and has been deducted from his
account according to the bank statement. Next the specialist notes Mr. Timmons
has written a $500 check to his landlord for rent on or around the
25th of each month for the last six months.
Since there is evidence that Mr. Timmons has written the
check and legally obligated those funds in his account, and his records provide
a complete and consistent picture of the account, the specialist can deduct the
amount of the uncashed check from the 5/1 first of the month balance. The
uncashed check can be deducted because SSI equity value rules state that in
determining equity value, we deduct encumbrances from the CMV. The new balance
of $850 permits eligibility on resources.
C. Under liberalized resource
policy, an encumbrance may occur when the applicant/recipient has alleged a
check has been written from a bank account, and it has not yet cleared the
bank. If the individual has alleged a check has been written from a bank
account and it has not cleared:
1. Examine
evidence that the check was written, therefore legally obligating the funds
from the bank account.
2.
Verification must be obtained before allowing a reduced equity value of the
bank account. Once verification, is received, the equity value of the bank
account can be established by deducting the amount of the check
written.
3. Verifications needed
are a paid receipt, cancelled check, etc.
a)
Example: Mr. Jon Doe applied for Medicaid on January 4. As of January 31, Mr.
Doe's bank statement shows a checking account balance of $2,350, which combined
with other countable resources, exceeds $4000. Mr. Doe alleges that the balance
includes his rent check of $500 which he wrote and gave to the landlord on
January 22, but his landlord has not yet cashed the check.
b) The specialist examines Mr. Doe's check
register and finds an annotation for check number 1345 written on January 22
for $500. Since there is evidence Mr. Doe has written the check from the
account, the specialist can deduct the amount of the uncashed check since it is
an encumbrance.
c) In determining
equity value of the bank account, the encumbrance of $500 is deducted from the
$2,350 in the bank account. Eligibility can be established for Mr. Doe for
January if he is otherwise eligible.
Social Security Act
§1902 (r)(2); 42 CFR §435.601(b) (Rev
1994).
