89 Ill. Adm. Code 120.388
Property Transfers Occurring On or After January 1, 2007
Section 120.388 Property
Transfers Occurring On or After January
1, 2007
The provisions in this
Section
are intended to comport with
federal requirements related
to transfers of assets, in particular, requirements under 42 USC 1396p 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 1396n(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
1396a(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 1382a) and resources (as defined in
42 USC 1382b, 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 408A);
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.