Protecting Your Assets

This past year the governor signed a new Minnesota law that could have a significant impact on estate planning and […]

This past year the governor signed a new Minnesota law that could have a significant impact on estate planning and the transfer of assets to qualify for public programs. Under this law, people who need Medical Assistance (MA) would not be able to transfer large amounts of assets 72 months before qualifying for MA. Currently, the state can only look at transfers made in the previous 36 months.

This new Minnesota law still needs approval by the federal government before it can be enforced. The Minnesota Department of Human Services held a comment period last spring on this proposal before it was made law by the legislature. It is not always known when a person transfers assets to their children or others whether the decision may come back to haunt them. Their disability or insurance status may change in that 72-month period and they may require MA.

The Minnesota Department of Human Services will hold a public hearing on this issue on December 19, 2003 at the Department of Human Services offices in St. Paul.

SUMMARY OF PROPOSED CHANGES

The changes proposed by the Minnesota Legislature affect transfers. “Transfers” as it is used here refers to gifts that a person makes and does not receive full value for in return. If a person gives away assets or income, such as cars, money, jewelry, real estate or anything else and the person giving it is not paid the full value of that asset or income, this can affect the person’s future eligibility for Medical Assistance (MA). It does not matter whether gifts are made to charities or to children. Transfers can affect eligibility for all MA programs, including these programs commonly used by people with MS; Community Alternatives for Disabled Individuals (CADI), Traumatic Brain Injury (TBI), and Elderly Waiver (EW), as well as for nursing home care.

72-month look-back period: Currently, a Medical Assistance applicant must disclose any transfers made during the 36 months preceding application. Such transfers result in a penalty, discussed below. The new law lengthens the disclosure time from 36 months to 72 months and would apply to gifts of any kind in excess of $200 in a month at any time during the six years before application.

The penalty period: Current law provides that, if you give away assets within three years of applying for Medical Assistance, you will be ineligible for Medical Assistance to pay for long-term care services for a number of months. The number of months of ineligibility is calculated using the average monthly MA rate for nursing home care. The new law would use the average payment made for care by Minnesota Department of Human Services (DHS). The average payment is a lower number than the average rate, thus resulting in a longer penalty period. For example, under current law a transfer of $10,000 gives a period of ineligibility of 2.59 months. Under the proposed law, the period of ineligibility could be as long as 4 months. And note, this would apply to any transfers within six years of applying for Medical Assistance. So if you gave away $10,000 to your grandson five years ago to help him through college, you could be ineligible for Medical Assistance for four months just at the time you had no money.

Ineligibility for MA services: Currently the penalty period applies only to long-term care services such as nursing home services, Elderly Waiver, CADI, TBI, and Alternative Care services. The new legislation applies the penalty period to all MA services, including medications, home health services, therapies and physician visits.

Disallowing transfers of excluded assets: Current law allows the transfer of personal property such as jewelry, furniture or other excluded assets. The new legislation would penalize such transfers.

Disallowing transfers of the homestead to certain relatives. It would no longer be permissible, as under current law, to transfer the homestead to the spouse, a blind or disabled child, or a child under age 21; to children who provide care to the applicant; or to siblings with an equity interest in the property.

Disallowing transfers to the spouse after MA eligibility. Current law allows the Medical Assistance recipient to transfer assets to the community spouse at any time, without penalty. Under the new law, it would still be allowable to transfer assets to the spouse before applying for MA, but after eligibility is established, no further transfers between spouses could be made. This would prevent the community spouse, who had already reduced assets substantially in order for the ill spouse to receive MA, to receive assets that could help to maintain him/her in the community.

Disallowing outright transfers to a blind or disabled child. Current law allows transfers directly to a blind or disabled child or to a trust for the benefit of the child without penalty. The new provisions would allow assets to be transferred only to a trust for the sole benefit of the blind or disabled child, but only if the trust reverts to the state at the disabled child’s death, to the extent that MA has paid for services for the grantor or beneficiary of the trust.

Permissible purposes of a trust: The new legislation allows the commissioner of DHS to decide whether a trust is for a valid purpose. If it is not for a valid purpose, assets placed into the trust shall always be considered available for purposes of MA eligibility, regardless of when the trust is established. There are no suggested guidelines for DHS to follow in determining what a valid purpose might be.

You can review the waiver request at the CMS Web site on the Web at http://cms.hhs.gov/medicaid/1115/mnatl.asp.