Elder Law Articles
Implementation by the Illinois Department of Health and Family Services of the Federal Deficit Reduction Act of 2005 (DRA). © 2012
Section 120.385 – Factors Affecting Eligibility for Long Term Care Services This Section deals other factors that will affect eligibility for long-term care services. The section goes on to discuss the disclosure of annuities and naming the status remainder beneficiary on annuities, home equity interest treatment and the disclosure promissory notes loans mortgages and assigning the interest in such instruments to the state. Since much has been debated about these three areas I will take them one at a time. Subsection a) provides that, for purposes of this Section, the terms “institutionalized persons” and long-term care services” shall have the meanings described in Section 120.388. The terms “institutionalized spouse” and “community spouse” shall have the meanings described in Section 120.379(a). Subsection b) is entitled the Disclosure of Annuity and Naming the State as Remainder Beneficiary. Requires that:1. With regard to annuities, effective January 1, 2012, an application or redetermination related to an application for long-term care services shall include a disclosure by institutionalized person or his or her community spouse of any interest either or both may have in any annuity or similar financial instrument purchased, regardless of whether the annuity is a revocable or is treated as an asset. An application or recertification shall also include a statement that the State of Illinois becomes a remainder beneficiary under such annuity or similar financial instrument meant to the extent that the state has provided medical assistance to the institutionalized person. This latter provision seems to set to rest much of the debate that surrounded the treatment of annuities and whether or not federal DRA mandated that a certain class of annuities, such as those found in IRA context, could be exempted from the requirement of naming the state is the remainder beneficiary to the extent of medical assistance provided by the state. 2. The section goes on to say that if there is a failure to disclose information about the annuity or to name the state is remainder beneficiary or to disclose sufficient information regarding the annuity in order to establish eligibility for long-term care services, this will result in the denial or termination of an out of eligibility. These failures can also be considered to be failure to cooperate under Section 120.308 and hence result in denial or termination of eligibility for failure to cooperate. Subsection c) deals with home equity interest:
- With regard to home equity interest, effective January 1, 2012, persons shall be deemed not eligible for long-term care services of the person’s equity interest in his or her homestead exceeds $750,000. As you recall, in federal DRA the states had the ability to go from $500,00 to 750,000 in this exemption. The State of Illinois has chosen to opt for the higher limit. There is a CPI inflator built-in to the provision. The calculation of the equity shall be based on the rules set forth for appraisals the calculation of current market value.
- The eligibility of a person for long-term care services shall not be affected under this subsection c) if any of the following are lawfully residing in the person’s home. Here we have the recurring federal exemptions from the loss of equity attributable to a residence in which there is lawfully residing in the person’s home: a. The person’s spouse, b. The person’s child who is under age 21, or c. The person’s adult child or who is blind or disabled, remain in effect.
- In a provision similar to that described above for the disclosure and treatment of remainder beneficiaries with regard to annuities, this subsection requires that, effective January 1, 2012, an application (or redetermination) for long-term care services shall include a disclosure by an institutionalized person or his or her community spouse of any purchase of a promissory note, loan or other mortgage either or both of them may have made. The application or recertification form shall include a statement that the instrument shall provide for the assignments 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
- If there is a failure to disclose, this could result in denial or termination of eligibility.
- depending on the property transferred, the transfer occurred more than either 60 or 36 months before the date of application, or more than either 60 or 36 months before entry into a long-term care facility or more than either 60 or 36 months before receipt of services provided by the Illinois Department of Aging under the in-home care program described it 89 Illinois Admin 140.643.60 month period applies to payments from a revocable trust that are not treated as income and two portions of the new revocable trust for which no payments could be made;That certain 36 month period applies to payments from in a revocable trust that are not treated as income and to any property transfers not identified in the subsection;
- Fair market value was received;
- Homestead property was transferred to: a spouse,the person’s child under age 21,the person’s child who was blind or disabled, the person’s brother or sister who has an equity interest in the homestead and who is residing in the home for at least one year immediately prior to the date the person that became institutionalized; or the person’s child who provided care for the person who was residing in the Homestead for two years immediately prior to the date the person became institutionalized. The transfer by the institutionalized person was to the community spouse or to another person for the sole benefit of the community spouse;
- The transfer from the community spouse was to another person for the sole benefit of the community spouse;
- The transfer was to the person’s child or to a trust established solely for the benefit of the person’s child was blind or disabled or to another person for the sole benefit of the person’s child;
- The transfer r was to a trust established solely for the benefit of a person under age 65 and was disabled;
- The person intended to transfer the assets for fair market value;
- It is determined that the denial of assistance would create an undue hardship. Examples are giving given for this exclusion;
- The transfer was made exclusively for a reason other than to qualify for assistance. HFS indicates that a transfer from Western???????????? for market value is presumed to not qualify for assistance unless a satisfactory showing made to the Department that the community spouse transfer the assets for reason other than to qualify;
- The trust transfer by the client was to the community spouse and was pursuant to a court order a court order;
- The asset transfers for less than market value has been returned to the person; or
- The transfer was to an annuity, the expected return on the annuity is commensurate with the estimated life expectancy of the person, and the annuity pays benefits that are in approximate equal periodic payments. In determining the life expectancy of the person the Department will use the current actuarial tables of the Social Security Administration referred to as table for C6.
- services provided in a long-term care facility as defined in 120.61 a and
- services provided under home and community-based waiver programs or under human in-home and community based waiver
- persons residing a long-term care facility including those who were residing in the community the time of a transfer of assets was made OR
- persons who but for the provisions of home and community based waiver services would require the level of care in a long-term care facility, including those persons receiving home care or community based waiver services were not receiving the services the time transfer was made.
- Assets or property included all income (as defined in 42 USC 13 828a) 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. Subsection 19 goes on to say that assets and property include but are not limited to cash, savings certificates, stocks, bonds, interest in real property, including mineral rights, rights to inherited real or personal property or income, and accounts and debts receivable.
- assets are defined to also include any income or resources that the person or the person spouse is entitled to but does not receive because of action or inaction by a. certain persons including the person or persons spouse, b. a legal or administrative body authorized to act on behalf of the person or the person spouse, any person acting at the direction or upon the request of the person or the person spouse c. any person including any quarter administrative body acting at the direction or upon the recount we quest of the person or the person spouse or d. or any person who acted (failed to act) to avoid receiving assets to which the person was entitled In subsection d)3) samples are given of the types of actions that would cause assets not to be received for purposes of paragraph indeed to, such as actions such as irrevocably waving pension income, waving the right to receive an inheritance, etc.
- this subsection 3 goes on to give examples of actions it would cause assets not to be received
- provides that 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.
- Homestead property was transferred a. to the person’s spouse, b. the person’s child who is under age 21, c. the person’s child was determined to be blind or disabled, d. the person’s brother a 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 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. I. In the case of the last provision described above this is the classic child caregiver exception. The section goes on to provide detail about qualification for the child caregiver exception and indicates that for purposes of the child caregiver exception, credible tangible evidence is indicated as that which shows that the person was in need of care that would have otherwise required in institutionalized level of care. The evidence may consist of the physician statement or evaluation conducted by medical profession well showing the need for institutional level of care. Interestingly the section indicates that a diagnosis of Alzheimer’s or other dementia related illness shall be prima facie evidence of the need for institutional level of care. II. The section goes on to say that tangible credible credible evidence should show that the son or daughter resided at the person for two years immediately prior to the person’s institutionalization. The evidence may consist of tax returns, drivers license, canceled checks or other documentation this demonstrating residence in the home for lease two years prior to that parents institutionalization. III. Finally the credible tangible evidence should show the son or daughter provided character that person that prevented institutionalization. This evidence may consist of a sworn affidavit or statement signed by the son or daughter
- the transfer : a. was made by the institutionalized person to i. the institutionalized spouse ii. the person’s child or to a trust established solely for the benefit of the person’s child or to another person for the sole benefit of the institutionalized persons child. iii. A trust established solely for the benefit of a person who is determined to be disabled. b. Several definitions are then the forth to implement this subsection. Specifically the concept of “ sole benefit of” a person means: i. the transfers are raised in 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 this bending of the funds involved for the benefit of the person on the basis that is actuarially sound extent a life expectancy of the person involved based on the Social Security tables. To relief provisions follow indicating that equal or periodic payments are not required for actuarial soundness. And this subsection does not apply the trust described in section 120.340 7D because those trusts provide for a payback to the state of the death of the beneficiary. iii. benefit is continue to mean that the transfer was a accomplished via written instrument of transfer such as a trust document that legally bind the parties to a specified course of action and clearly sets out the conditions in which under which the transfer was made as well as who can benefit from the transfer. A transfer without such a document he may not be said to have been made for the sole benefit of a person’s answers no way to establish without the document that only the specified person will benefit from the transfer.
- Section 3 goes on to indicate that a person shall not be subject to a penalty and and under section 120.38 to the the person intended to transfer the property for fair market value. When the property is transferred for less than fair market value a person is presumed to have done so intentionally. The presumption may be rebutted by objectives tangible evidence of the following: a. initial and continuing reasonable good faith efforts to sell the property on the open market, b. it legally binding contract was executed that provided for adequate compensation in a specified form, c. the person acted in good faith and that he was receiving for market value, d. the person has other adequate means are plans for support at the time of transfer.
- In subsection m4 a person shall not be subject to a penalty Under section 120.388 the transfer was made exclusively for reason other than to qualify or remain eligible for medical assistance. This section goes on to provide somewhat of a safe harbor provision that was the subject of some controversy in may or may not may not be considered generous depending on your point of view.. The section goes on to indicate that a transfer for less than fair market value is presumed to been made to qualify for assistance. However this presumption may be rebutted by credible tangible evidence that the person or the 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 conditions such as stroke or Alzheimer’s or personal injury may provide convincing evidence that there was no reason to interest abated need for long-term care. Subjective statements are not sufficient. Section goes on to describe other examples of credible evidence and include but are not limited to a. police reports, b. evidence that the transfer was made by a person lacking mental capacity, c. and Institute transfers were for everyday living expenses and incidental gifts to family members or contributions to charities or religious organizations and d. other evidence pertaining to the person circumstances of the time of transfer relating to i. physical condition ii. financial situation, iii. need for medical assistance, iv. changes in living arrangements, v. access time between the transfer an application for medical assistance and vi. whether the unexpected events occurred between the transfer and application.
- Subsection and goes on to indicate that a person shall not be subject to a penalty for transfers property disregarded as a result of payments made by a long-term care insurance policy approved by the Dir. of Illinois Department of Insurance under the qualified long-term care insurance partnership(see 50 ill admin code 2012)
- subsection and continues to indicate that a person shall not be subject to a penalty under this subsection 120.38 to the extent that the assets transferred for less than fair market value have been returned to the person. This is the section dealing with returns of assets. As a general proposition partial returns have donated notwithstanding CMS’s guidance that estate may permit partial returns. The state of Illinois has chosen, as some other states have, to eliminate the availability of partial returns in almost every circumstance and instead commit only complete returns to be made. a. Him The section indicates that for transfers occurring after occurring prior to January 1, 2012 if only parts of transferred assets are returned a penalty. Shelby reduced but not eliminated. For example if only half of the value is returned the penalty period shall be reduced by one half. b. However for transfers occurring on or after January 1 of 2012 all of the assets transferred for less than fair market value must have been returned to the person. Full or partial returns occurring prior to the imposition of a penalty reduced the and compensated portion of the transfer by the amount returned. Once a penalty is imposed it may only be a limited if all assets transferred for less than fair market value are returned. This section implies that prior to the imposition of a penalty which requires financial eligibility and the submission of the Medicaid application, partial returns are permitted. Once the application is filed only complete returns will be permitted.The section goes on to indicate that when all transferred assets are returned the assets are treated as return on the date the penalty was imposed. The penalty is that he raced in 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 the return of the assets the Department will treat the assets as available to meet the spend down obligation for that time period only. At the point in time that assets are in fact returned their treated as available assets that may be reduced by a spend down obligation or otherwise. Returned assets that are transferred for less than fair market value may be subject to penalty.
- The last provision of subsection m indicates that a person shall not be subject to a penalty. Under section 120.388 to the extent that the Department determines that the denial of eligibility would cause undue hardship as provided in subsection r of this section below. Subsection r has a lot of detail associated with it and will be discussed further below.
- 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
- second 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 representative of the child disposes of any remainder for less than fair market value.
- one of three conditions are met, first the annuity is considered either: A. an individual retirement account or B. a deemed it individual retirement account under a qualified employer plan. will the new shelter
- the annuity is directly purchased with proceeds from one of the following: a. traditional IRAs, b. certain accounts or trusts treated as a traditional IRA under section 408 a of the Internal Revenue Code c. a simple for simplified employee pension, or
- the annuity meets all of the following requirements a. Was purchased from a commercial financial institution or insurance company, b. is actuarially sound based on the estimated life expectancy of the person in accordance with the Social Security tables. Parentheses. Certain annuities that pay over term less than the persons expected life except that life expectancy shall be treated as actuarially sound) c. is your irrevocable and nonassignable and d. pays benefits in approximately equal periodic payments no less than orderly with no deferred or balloon payments.
- The hardship waiver provision starts by indicating that the Department shall waive a penalty. If it determines that the application the penalty will create an undue hardship. The state then goes on to describe that undue hardship exists when application of a penalty would deprive institutionalized person: a. of medical care, endangering the person’s health or life, or depriving the institutionalized person b. of food clothing shelter or other necessities of life.
- persons who request a hardship waiver shall have the burden of proof that actual not just possible hardship exists. The Department can require 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 ineligibility for long-term care services. The state goes on to indicate that the following criteria shall be considered in determining whether the hardship waiver shall be granted: a. indent a whether credible evidence is presented that the person in good faith and to the best of their ability has taken all equitable and legal means to recover and asset that is been transferred for less than for market value. Estate points out that in cases that involve alleged threat fraud elder abuse or other misappropriation of assets, evidence of referrals to the police or other law or regulatory agency is required, b. the medical condition mental capacity financial liability and other factors that have affected the person time of decision transfer the assets, c. the denial assistance would force the person to move and d. subject to the availability of beds the person would be prohibited from driving a spouse in a facility or form entering a facility that is close in proximity to his or her family.
- For transfers prior to November 1, 2011. This provision indicates that notwithstanding the prior rules described above dealing with hardship exception, and notwithstanding the January 1, 2012 implement implementation date of the look back., For transfers occur in prior to November 1, 2011 at hardship waiver shall be granted if the applicant signs and 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 of the person faces deprivation of the elements described above. It is unknown what the attestation form can look like. Perhaps this will be fleshed out policy manual. Attestation could mean an act to affirm that what has been stated is true.
- This provision indicates that a facility in which it institutionalized persons residing may request a hardship waiver on behalf of that person under subsection are 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. This is an attempt to allow facilities to seek a hardship exception on behalf of one of the residence.
- The first paragraph indicates a Department shall issue a notice to the person who is subject to a penalty. Not less than 10 days prior to the imposition the penalty. The notice must 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 the penalty. Pursuant to 89 ill admin code 102.80.
- The last section of the notice provision indicates a notice imposition of a penalty period shall inform the person that a hardship waiver under our may be requested and that the personal facility in which the person resides may submit in writing pursuant to sub subsection are to evidence that hardship exists. The evidence can be submitted to the Department which will shall review the information and based on the criteria determined under subsection are determine whether or hardship waivers should be granted. Upon complete completion of its review the Department shall issue a notice of decision I request for hardship rate waiver that showing who the statement that the person may appeal the decision pursuant to 89 Illinois admin 102.80 that is the end