Revision 09-4; Effective December 1, 2009

The following rules are taken from Subchapter C, Financial Requirements, Division 4, Transfer of Assets, Transfer of Assets on or after Feb. 8, 2006.

§358.401. Transfer of Assets on or after February 8, 2006

(a) This section applies to a person in an institutional setting whose date of application or program transfer request date is on or after October 1, 2006, and who takes an action defined by this section to be a transfer of assets on or after February 8, 2006.

(b) The Texas Health and Human Services Commission (HHSC) uses the definitions under the provisions of §1917(e) of the Social Security Act (42 U.S.C. §1396p(h)).

(1) Assets include all income and resources of a person and of the person's spouse, including any income or resources that the person or the person's spouse is entitled to but does not receive because of action:

(A) by the person or the person's spouse;

(B) by an individual, 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; or

(C) by any individual, including any court or administrative body, acting at the direction or upon the request of the person or the person's spouse.

(2) The term "income" has the meaning given such term in §1612 of the Social Security Act (42 U.S.C. §1382a).

(3) The term "resources" has the meaning given such term in §1613 of the Social Security Act (42 U.S.C. §1382b), without regard (in the case of a person in an institutional setting) to the exclusion of the home.

(c) In this section, "person" includes the applicant or recipient as well as:

(1) the person's spouse;

(2) an individual, including a court or administrative body, with legal authority to act in place of or on behalf of the person or person's spouse; and

(3) any individual, including a court or administrative body, acting at the direction or upon the request of the person or the person's spouse.

(d) HHSC applies the penalty for transfers of assets under the provisions of §1917(c)(1) of the Social Security Act (42 U.S.C. §1396p(c)(1)). The provisions of §358.402 of this division (relating to Transfer of Assets before February 8, 2006) continue in effect for transfers on or after February 8, 2006, except to the extent that they are inconsistent with this section.

(1) This paragraph establishes HHSC's treatment of transfers made on or after February 8, 2006, the date of enactment of the Deficit Reduction Act of 2005.

(A) Disposing of assets. If a person in an institutional setting or the spouse of such a person disposes of assets for less than fair market value on or after the look-back date specified in subparagraph (B) of this paragraph, the person is ineligible for medical assistance for services described in subparagraph (C) of this paragraph during the period beginning on the date specified in subparagraph (D) of this paragraph and equal to the number of months specified in subparagraph (E) of this paragraph.

(B) Look-back period.

(i) The look-back date specified in this subparagraph is a date that is 36 months (or, in the case of payments involving a trust or portions of a trust that are treated as assets disposed of by the person pursuant to §358.402(e)(2) of this division or in the case of any other disposal of assets made on or after February 8, 2006, the date of enactment of the Deficit Reduction Act of 2005, 60 months) before the date specified in clause (ii) of this subparagraph.

(ii) The date specified in this clause, with respect to:

(I) a person in an institutional setting, except a person receiving services under a §1915(c) waiver program, is the first date as of which the person both is in an institutional setting and has applied for medical assistance under the Texas State Plan for Medical Assistance; or

(II) a person receiving services under a §1915(c) waiver program, is the date on which the person applies for medical assistance under the Texas State Plan for Medical Assistance or, if later, the date on which the person disposes of assets for less than fair market value.

(C) Ineligible for medical assistance for services. A person in an institutional setting who disposes of assets as described in subparagraph (A) of this paragraph is ineligible for the following services:

(i) nursing facility services;

(ii) a level of care in any institution equivalent to that of nursing facility services; and

(iii) §1915(c) waiver program services.

(D) Beginning date of penalty.

(i) In the case of a transfer of asset made before February 8, 2006, the date of enactment of the Deficit Reduction Act of 2005, the beginning date of penalty, specified in this subparagraph, is the first day of the first month during or after which assets have been transferred for less than fair market value and which does not occur in any other periods of ineligibility under this subsection.

(ii) In the case of a transfer of asset made on or after February 8, 2006, the date of enactment of the Deficit Reduction Act of 2005, the beginning date of penalty, specified in this subparagraph, is the first day of a month during or after which assets have been transferred for less than fair market value, or the date on which the person is eligible for medical assistance under the Texas State Plan for Medical Assistance and would otherwise be receiving institutional level of care described in subparagraph (C) of this paragraph based on an approved application for such care but for the application of the penalty period, whichever is later, and which does not occur during any other period of ineligibility under this subsection.

(E) Length of ineligibility period.

(i) With respect to a person in an institutional setting, except a person receiving services under a §1915(c) waiver program, the number of months of ineligibility under this subparagraph for such person is equal to the total, cumulative uncompensated value of all assets transferred by the person (or person's spouse) on or after the look-back date specified in subparagraph (B)(i) of this paragraph, divided by the average monthly cost to a private patient of nursing facility services in the state at the time of application.

(ii) With respect to a person receiving services under a §1915(c) waiver program, the number of months of ineligibility under this subparagraph for such person must not be greater than a number equal to the total, cumulative uncompensated value of all assets transferred by the person (or person's spouse) on or after the look-back date specified in subparagraph (B)(i) of this paragraph, divided by the average monthly cost to a private patient of nursing facility services in the state at the time of application.

(iii) The number of months of ineligibility otherwise determined under clause (i) of this subparagraph with respect to the disposal of an asset shall be reduced:

(I) in the case of periods of ineligibility determined under clause (i) of this subparagraph, by the number of months of ineligibility applicable to the person under clause (ii) of this subparagraph has a result of such disposal; and

(II) in the case of periods of ineligibility determined under clause (ii) of this subparagraph, by the number of months of ineligibility applicable to the person under clause (i) of this subparagraph as a result of such disposal.

(iv) HHSC does not round down, or otherwise disregard any fractional period of ineligibility determined under clause (i) or (ii) of this subparagraph with respect to the disposal of assets.

(F) Annuity. The purchase of an annuity made on or after February 8, 2006, the date of enactment of the Deficit Reduction Act of 2005, is treated as the disposal of an asset for less than fair market value unless:

(i) the State is named as the remainder beneficiary in the first position for at least the total amount of medical assistance paid on behalf of the annuitant under this title; or

(ii) the State is named as such a beneficiary in the second position after the community spouse or minor or disabled child and is named in the first position if such spouse or a representative of such child disposes of any such remainder for less than fair market value.

(G) Annuity exceptions. With respect to a transfer of assets, the term "assets" includes an annuity purchased on or after February 8, 2006, the date of enactment of the Deficit Reduction Act of 2005, by or on behalf of an annuitant who has applied for medical assistance with respect to services in an institutional setting unless:

(i) the annuity is:

(I) an annuity described in subsection (b) or (q) of section 408 of the Internal Revenue Code of 1986; or

(II) purchased with proceeds from:

(-a-) an account or trust described in subsection (a), (c), or (p) of section 408 of such Code;

(-b-) a simplified employee pension (within the meaning of section 408(k) of such Code); or

(-c-) a Roth IRA described in section 408A of such Code; or

(ii) the annuity:

(I) is irrevocable and nonassignable;

(II) is actuarially sound (as determined in accordance with actuarial publications of the Office of the Chief Actuary of the United States Department of Health and Human Services); and

(III) provides for payments in equal amounts during the term of the annuity, with no deferral and no balloon payments made.

(H) Promissory note, loan, or mortgage. In the case of a promissory note, loan, or mortgage that does not satisfy the requirements of clauses (i) through (iii) of this subparagraph, the value of such note, loan, or mortgage is the outstanding balance due as of the date of the person's application for medical assistance for services described in subparagraph (C) of this paragraph and this amount would be used to determine the length of ineligibility. For purposes of this paragraph with respect to a transfer of assets, the term "assets" includes funds used to purchase, on or after April 1, 2006, a promissory note, loan, or mortgage unless such note, loan, or mortgage:

(i) has a repayment term that is actuarially sound (as determined in accordance with actuarial publications of the Office of the Chief Actuary 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 the cancellation of the balance upon the death of the lender.

(I) Life estate. For purposes of this paragraph with respect to a transfer of assets, the term "assets" includes the purchase of a life estate interest in another individual's home made on or after April 1, 2006, unless the purchaser resides in the home for a period of at least one year after the date of the purchase.

(2) HHSC allows exceptions to transfers of assets under the provisions of §1917(c)(2) of the Social Security Act (42 U.S.C. §1396p(c)(2), if:

(A) the assets transferred were a home, and title to the home was transferred to:

(i) the spouse of such person;

(ii) a child of such person who:

(I) is under 21 years of age; or

(II) is blind or disabled as defined in §1614 of the Social Security Act (42 U.S.C. §1382c);

(iii) a sibling of such person who has an equity interest in such home and who was residing in such person's home for at least one year immediately before the date the person transferred to an institutional setting; or

(iv) a son or daughter of such person (other than a child described in clause (ii) of this subparagraph) who was residing in such person's home for a period of at least two years immediately before the date the person transferred to an institutional setting and who, as determined by the State, provided care to such person which permitted such person to reside at home rather than in such an institution or facility;

(B) the assets:

(i) were transferred to the person's spouse or to another for the sole benefit of the person's spouse;

(ii) were transferred from the person's spouse to another for the sole benefit of the person's spouse;

(iii) were transferred to a trust (including a trust described in §358.402(e)(2) of this division) established solely for the benefit of the person's child described in subparagraph (A)(ii)(II) of this paragraph; or

(iv) were transferred to a trust (including a trust described in §358.402(e)(2) of this division) established solely for the benefit of a person under 65 years of age who is disabled as defined in §1614(a)(3) of the Social Security Act (42 U.S.C. §1382c(a)(3));

(C) a satisfactory showing is made to the State that:

(i) the person intended to dispose of the assets either at fair market value, or for other valuable consideration;

(ii) the assets were transferred exclusively for a purpose other than to qualify for medical assistance; or

(iii) all assets transferred for less than fair market value have been returned to the person; or

(D) HHSC:

(i) determines that the denial of eligibility would work an undue hardship when application of the transfer of assets provision would deprive the person:

(I) of medical care such that the person's health or life would be endangered; or

(II) of food, clothing, shelter, or other necessities of life; and

(ii) provides for:

(I) notice to recipients that an undue hardship exception exists;

(II) a timely process for determining whether an undue hardship waiver will be granted; and

(III) a process under which an adverse determination can be appealed.

(3) Under paragraph (2)(D) of this subsection, a facility in which the person in an institutional setting is residing may file an undue hardship waiver application on behalf of the person with the consent of the person or the person's authorized representative.

(4) For purposes of this subsection effective on or after February 8, 2006, the date of enactment of the Deficit Reduction Act of 2005, in the case of an asset held by a person in common with another individual or individuals in a joint tenancy, tenancy in common, or similar arrangement, the asset (or the affected portion of such asset) is considered to be transferred by such person when any action is taken, either by such person or by any other individual, that reduces or eliminates such person's ownership or control of such asset.

(5) HHSC does not provide for any period of ineligibility for a person due to transfer of resources for less than fair market value except in accordance with this subsection. In the case of a transfer by the spouse of a person which results in a period of ineligibility for medical assistance for such person, HHSC apportions such period of ineligibility (or any portion of such period) among the person and the person's spouse if the spouse otherwise becomes eligible for medical assistance.

(6) In this subsection, the term "resources" has the meaning given such term in §1613 of the Social Security Act (42 U.S.C. §1382b), without regard (in the case of a person in an institutional setting) to the exclusion of the home.

(e) Impact on spousal protected resource amount. In spousal situations, if assets are transferred to a third party before institutionalization or by the community spouse, HHSC does not include the uncompensated amount of the transfer in calculating the spousal protected resource amount or countable resources upon application for Medicaid.

(f) Transfer of income.

(1) A person may incur a transfer penalty by transferring income. Transfers of income include:

(A) waiving the right to receive an inheritance even in the month of receipt;

(B) giving away a lump sum payment even in the month of receipt; or

(C) irrevocably waiving all or part of federal, state, or private pensions or annuities.

(2) The date of transfer is the date of the actual change in income. Interspousal transfers of income are permitted (for example, obtaining a court order to have community property pension income paid to a community spouse).

(3) Because revocable waivers of pension benefits can be revoked and the benefits reinstated, no uncompensated value is developed, and no transfer-of-assets penalty is incurred. Such waivers are subject to the utilization-of-benefits policy, and the person must apply for reinstatement of the full pension amount or the person is ineligible for all Medicaid benefits.

(g) Disclosure and treatment of annuities. HHSC, under the provisions of §1902(a)(18) of the Social Security Act (42 U.S.C. §1396a(18)), requires the following as a condition for the provision of medical assistance for services described in subsection (d)(1)(C) of this section:

(1) An application for assistance (including any recertification of eligibility for such assistance) must disclose a description of any interest the person or community spouse has in an annuity (or similar financial instrument as directed by the United States Department of Health and Human Services), regardless of whether the annuity is irrevocable or is treated as an asset. Such application or recertification form must include a statement that under paragraph (2) of this subsection the State becomes a remainder beneficiary under such an annuity or similar financial instrument by virtue of the provision of such medical assistance.

(2) In the case of disclosure concerning an annuity under subsection (d)(1)(F) of this section, HHSC notifies the issuer of the annuity of the right of the State under such subsection as a preferred remainder beneficiary in the annuity for medical assistance furnished to the person. Nothing in this paragraph shall be construed as preventing such an issuer from notifying persons with any other remainder interest of the State's remainder interest under such subsection.

(3) HHSC establishes categories of transactions that may be treated as a transfer of asset for less than fair market value as the United States Department of Health and Human Services provides guidance.

(4) Nothing in this subsection shall be construed as preventing HHSC from denying eligibility for medical assistance for a person based on the income or resources derived from an annuity described in paragraph (1) of this subsection.

Revision 18-1; Effective March 1, 2018

Transfer of assets policy applies when assets are transferred by a person who resides in an institutional setting (for example, a Medicaid certified long-term care facility) or is receiving home and community-based waiver services through a Home and Community-Based Services waiver, or by the person’s spouse or someone else acting on the person’s behalf.

Transfer of assets policy does not apply to the mandatory groups of MEPD programs such as Pickle. See Section A-1000, General Information, and Section A-2000, Mandatory Coverage Groups, for information. Transfer of assets policy also does not apply to the Medicare Savings programs such as QMB, SLMB, etc.

There is a "look-back" period to find transfers of assets prior to the date the person is institutionalized or, if later, the date the person applies for Medicaid.

If a transfer of assets for less than fair market value is found, Medicaid must withhold payment for nursing facility care (and certain other long-term care services) for a period of time referred to as the penalty period.

The length of the penalty period is determined by dividing the value of the transferred asset by the average private-pay rate for nursing facility care in Texas. There is no limit to the length of the penalty period.

For certain types of transfers, no penalty is applied. The principal exceptions to the transfer of asset penalty are transfers:

• to a spouse or to a third party for the sole benefit of the spouse;
• by a spouse to a third party for the sole benefit of the spouse;
• to certain disabled individuals or to trusts established for those individuals;
• for a purpose other than to qualify for Medicaid; and
• for which imposing a penalty would cause undue hardship.

Example: Assets transferred to an Achieving a Better Life Experience (ABLE) account for the benefit of a disabled child are not subject to a penalty period. (See Section I-3300 “For the Sole Benefit” Requirements.)

 

I-1210 Transfer of Assets Terms

Revision 09-4; Effective December 1, 2009

The term assets, with respect to person, includes all income and resources of the person and of the person's spouse, including any income or resources that the person or such person's spouse is entitled to but does not receive because of action by:

• the person or such individual's spouse;
• a person, including a court or administrative body, with legal authority to act in place of or on behalf of the person or such individual's spouse; or
• any person, including any court or administrative body, acting at the direction or upon the request of the person or such individual's spouse.

Examples of actions that would cause income or resources not to be received are:

• irrevocably waiving pension income;
• waiving the right to receive an inheritance;
• not accepting or accessing injury settlements; and
• tort settlements that are diverted by the defendant into a trust or similar device to be held for the benefit of the plaintiff.

Revision 09-4; Effective December 1, 2009

As part of Public Law 109-171, Deficit Reduction Act (DRA) of 2005, policy regarding transfer of assets changed when the DRA was signed into law on Feb. 8, 2006. The implementation of the DRA in Texas was effective Oct. 1, 2006.

Transfer of assets policy in Texas before the DRA, based on the Omnibus Budget Reconciliation Act (OBRA) of 1993 (Public Law 103-66), continues with these areas as exceptions found in the DRA transfer of assets rules:

• look-back period;
• penalty start date;
• purchase of life estates;
• purchase of promissory notes, loans or mortgages; and
• undue hardship.

As part of the DRA, there was a major change to the value of a home and eligibility for Medicaid. See Section F-3600, Substantial Home Equity, and Section F-3700, Continuing Care Retirement Communities.

The transfer of assets rules after the DRA are found in Section I-1100, Texas Administrative Code Rules. The transfer of assets policy in Texas before the DRA, based on OBRA 1993 (Public Law 103-66) are found in Section I-9000, Pre-DRA Rules.

 

I-1310 Persons Impacted by Transfer of Assets

Revision 09-4; Effective December 1, 2009

Transfer of assets policy applies when assets are transferred by a person who resides in an institutional setting (for example, a Medicaid certified long-term care facility) or is receiving home and community-based waiver services through a Home and Community-Based Services waiver, or by the person’s spouse or someone else acting on the person’s behalf.

Transfer of assets policy does not apply to the mandatory groups of MEPD programs such as Pickle. See Section A-1000, General Information, and Section A-2000, Mandatory Coverage Groups, for information. Transfer of assets policy also does not apply to the Medicare Savings programs such as QMB, SLMB, etc.

Under transfer of assets policy, recipients residing in a Medicaid long-term care facility remain eligible for all other Medicaid benefits and continue to receive Medicaid benefits other than vendor payment for the length of the penalty period. However, a person residing in a state supported living center is denied Medicaid for any penalty period resulting from an uncompensated transfer of assets. This is because the only benefit provided under a MEPD program for a person in a state supported living center is vendor payments.

If a person applying for a Home and Community-Based Services waiver requires receipt of waiver services to be eligible for Medicaid, then the person is ineligible for all Medicaid benefits. Based on pre-DRA transfer of assets policy, the Home and Community-Based Services waiver person is ineligible for the length of the penalty period. Based on post-DRA, the Home and Community-Based Services waiver person is ineligible until the transfer does not appear during the look-back period.

Denial of a Home and Community-Based Services waiver based on an uncompensated transfer does not disqualify the person for pure Qualified Medicare Beneficiary (QMB) or Specified Low-Income Medicare Beneficiary (SLMB) benefits. If all eligibility criteria for QMB or SLMB are met, HHSC staff can certify the person for QMB or SLMB, as appropriate.

In spousal situations, if assets are transferred to a third party before institutionalization or by the community spouse, HHSC does not include the uncompensated amount of the transfer in calculating the spousal protected resource amount or countable resources upon application for Medicaid.

 

I-1320 Applications and Other Actions on or After Oct. 1, 2006

Revision 09-4; Effective December 1, 2009

Post-DRA transfer of assets policy impacts any person who applies for Medicaid in an institutional setting on or after Oct. 1, 2006. Post-DRA transfer of assets policy also impacts any person who is Medicaid eligible in the community and requests a program transfer for Medicaid in an institutional setting on or after Oct. 1, 2006. This includes:

Applicants — For applications filed on or after Oct. 1, 2006, consider both pre-DRA and post-DRA policy for an institutional program or waiver services.

Program transfer requests — For program transfer requests from any Medicaid program to an institutional program or waiver services on or after Oct.1, 2006, consider both pre-DRA and post-DRA policy.

Redeterminations — For redeterminations of institutional or waiver services worked on or after Oct.1, 2006, consider both pre-DRA and post-DRA policy.

Reported changes — For reported changes worked on or after Oct.1, 2006, consider both pre-DRA and post-DRA policy for institutional or waiver services.

Note: Pre-DRA or post-DRA transfer of assets policies regarding penalty do not apply to an individual who has had continuous Medicaid coverage before March 1, 1981. This includes any person who is Medicaid eligible in the community and requests a program transfer to an institutional program or waiver services and who has had continuous Medicaid coverage before March 1, 1981.

 

I-1330 Transfer Transaction Date

Revision 09-4; Effective December 1, 2009

If the transfer transaction date is:

• before Feb. 8, 2006, use pre-DRA policy in determining eligibility for vendor payment and waiver services, regardless of the application file date/program transfer or the date of the case manager action for an existing case; or
• on or after Feb. 8, 2006, use pre-DRA and post-DRA policy in determining eligibility for vendor payment and waiver services based on application file date/program transfer or the date of the case manager action for an existing case.

Revision 09-4; Effective December 1, 2009

A person may incur a transfer penalty by transferring income. Transfers of income include:

• waiving the right to receive an inheritance even in the month of receipt;
• giving away a lump sum payment even in the month of receipt; or
• irrevocably waiving all or part of federal, state or private pensions or annuities.

The date of transfer is the date of the actual change in income, if within the look-back period or during an ongoing month.

Interspousal transfers of income are permitted (for example, obtaining a court order to have community property pension income paid to a community spouse).

Because revocable waivers of pension benefits can be revoked and the benefits reinstated, no uncompensated value is developed, and no transfer of assets penalty is incurred.

Such pension waivers are subject to nonfinancial requirements and the person must apply for reinstatement of the full pension amount or the person is ineligible for all Medicaid benefits.

Example: In August of this year, a person authorized a revocable reduction of $100 per month in her Civil Service Annuity (CSA) benefit, which was effective Sept. 1 of this year. Because gross income is within the special income limit, and all eligibility criteria are met, the person may be certified for Medicaid. The person is sent written notice that she must apply for reinstatement of the full CSA amount within 30 days. If she does so, her eligibility is re-evaluated based upon receipt of the full benefit. If she fails to do so, denial action is initiated.

Revision 09-4; Effective December 1, 2009

Any action by the person's co-owner(s) to eliminate the person's ownership interest or control of a joint asset, with or without the person's consent, is a transfer of assets. Placing another person's name on an account or other asset that results in limiting the person's control of an asset (right to dispose) is a transfer of assets.

Joint bank account procedures are consistent with this policy.

 

I-1510 Participation Examples

Revision 13-2; Effective June 1, 2013

• The person and her brother jointly own (one-half interest each) non-homestead real property. Both of their names appear on the warranty deed. The person's brother, without the person's knowledge or consent, filed another warranty deed that shows him as the sole owner. This action by the person's co-owner constitutes a transfer.
• Joe Davis is a co-signer on a joint bank account, along with his son and daughter. Mr. Davis' children deleted his name from both the styling and signature card. Form H1299, Request for Joint Bank Account Information, shows that all of the funds belonged to Mr. Davis and that the children's names were added so they could access the funds in an emergency. Mr. Davis said he did not know that his name had been deleted, nor did he authorize this action. This must be developed as an uncompensated transfer. Depending upon the circumstances, the undue hardship provisions of Section I-4300, Undue Hardship, may apply.
• The person has a bank account styled solely in his name. His daughter adds her name to the account styling and control as an "and," thereby restricting the person's use of the account without the daughter's approval. This must be developed as an uncompensated transfer.
• When someone uses an applicant’s money to purchase a vehicle, and the title is placed in both the applicant’s name and the other person’s name, consider the entire purchase price of the vehicle as a transfer, because when the applicant’s money was used to purchase a vehicle with the applicant and the other person as owners, the applicant’s ownership or control of the asset was reduced or limited.

Examples

• A vehicle was purchased for $15,000 on June 30, 2012. All of the money was the applicant’s; however, the title was put in the applicant’s and her son’s name because he would be driving her around in the car. The entire $15,000 is considered the transferred amount.
• A vehicle was purchased June 30, 2012, for $10,761.57. $8,100 of the applicant’s money was used, and her son paid the remaining $2,661.57. The title of the car is in both names. The $8,100, which the applicant provided for the purchase, is considered the transferred amount.

Revision 09-4; Effective December 1, 2009

A partial transfer of real property occurs when a person transfers only a portion of real property. A person may engage in partial transfers of real property repeatedly, once per month over a period of months, with the apparent purpose of gifting away the entirety of the real property while at the same time shortening or avoiding a transfer of assets penalty. This is sometimes referred to as aggressive transferring.

Since the estate planning community incorporates many different approaches in partial transfers of real property, a transaction-by-transaction analysis by agency legal staff is critical for a correct determination of any resulting penalty period. Accordingly, eligibility staff who encounter partial transfers of real property must promptly refer each transaction to their regional attorney for a case-by-case legal opinion.