PROPOSED RULES
SOCIAL AND HEALTH SERVICES
(Medical Assistance Administration)
Original Notice.
Preproposal statement of inquiry was filed as WSR 02-07-109.
Title of Rule: New WAC 388-513-1364 Evaluating the transfer of an asset made on or after March 1, 2003, for long-term care (LTC) services; and amending WAC 388-561-0001 Definitions and 388-561-0100 Trusts.
Purpose: To establish clear policy on lifetime care contracts and sole benefit trusts as they affect a client's eligibility for long-term care program services.
Statutory Authority for Adoption: RCW 74.04.050, 74.04.057, 74.08.090, and 74.09.575.
Statute Being Implemented: RCW 74.04.050 and 74.09.575.
Summary: See Purpose above.
Name of Agency Personnel Responsible for Drafting, Implementation and Enforcement: Mary Beth Ingram, P.O. Box 45534, Olympia, WA 98504-5534, (360) 725-1327.
Name of Proponent: Department of Social and Health Services, governmental.
Rule is not necessitated by federal law, federal or state court decision.
Explanation of Rule, its Purpose, and Anticipated Effects: See Purpose above.
Proposal Changes the Following Existing Rules: The rules clarify the department's policy on how lifetime care contracts and sole benefit trusts are considered for long-term care program eligibility.
No small business economic impact statement has been prepared under chapter 19.85 RCW. This rule has no impact on small businesses. It only affects client eligibility for services.
RCW 34.05.328 does not apply to this rule adoption. Although this rule meets the definition of a significant legislative rule, it is exempt under RCW 34.05.328 (5)(b)(vii), "rules of the Department of Social and Health Services relating only to client eligibility for medical or financial assistance and rules concerning liability for care of dependents."
Hearing Location: Blake Office Park (behind Goodyear Courtesy Tire), 4500 10th Avenue S.E., Rose Room, Lacey, WA 98503, on February 4, 2003, at 10:00 a.m.
Assistance for Persons with Disabilities: Contact Andy Fernando, DSHS Rules Coordinator, by January 31, 2003, phone (360) 664-6094, TTY (360) 664-6178, e-mail fernaax@dshs.wa.gov.
Submit Written Comments to: Identify WAC Numbers, DSHS Rules Coordinator, Rules and Policies Assistance Unit, P.O. Box 45850, Olympia, WA 98504-5850, fax (360) 664-6185, e-mail fernaax@dshs.wa.gov, by 5:00 p.m., February 4, 2003.
Date of Intended Adoption: Not sooner than February 5, 2003.
December 23, 2002
Bonita H. Jacques
for Brian H. Lindgren, Manager
Rules and Policies Assistance Unit
3200.2(1) The department disregards the following transfers by the client, if they meet the conditions described:
(a) Gifts or donations totaling one thousand dollars or less in any month;
(b) The transfer of an excluded resource described in WAC 388-513-1360 with the exception of the client's home, unless the transfer of the client's home meets the conditions described in subsection (1)(d);
(c) The transfer of an asset for less than fair market value (FMV), if the client can provide evidence to the department of one of the following:
(i) An intent to transfer the asset at FMV or other adequate compensation;
(ii) The transfer is not made to qualify for LTC services;
(iii) The client is given back ownership of the asset;
(iv) The denial of eligibility would result in an undue hardship.
(d) The transfer of ownership of the client's home, if it is transferred to the client's:
(i) Spouse; or
(ii) Child, who:
(A) Meets the disability criteria described in WAC 388-511-1105 (1)(b) or (c); or
(B) Is less than twenty-one years old; or
(C) Lived in the home for at least two years immediately before the client's current period of institutional status, and provided care that enabled the client to remain in the home; or
(iii) Brother or sister, who has:
(A) Equity in the home; and
(B) Lived in the home for at least one year immediately before the client's current period of institutional status.
(e) The transfer of an asset other than the home, if the transfer meets the conditions described in subsection (4), and the asset is transferred:
(i) To the client's spouse or to another person for the sole benefit of the spouse;
(ii) From the client's spouse to another person for the sole benefit of the spouse;
(iii) To the client's child who meets the disability criteria described in WAC 388-511-1105 (1)(b) or (c), or to a trust established for the sole benefit of this child; or
(iv) To a trust established for the sole benefit of a person who is sixty-four years old or younger and meets the disability criteria described in WAC 388-511-1105 (1)(b) or (c).
(2) The department disregards the transfer of an asset to a family member prior to the current period of institutional status and does not establish a period of ineligibility, if:
(a) The transfer is in exchange for care services the family member provided the client;
(b) The client has a documented need for the care services provided by the family member;
(c) The care services provided by the family member are allowed under the Medicaid state plan or the department's waivered services;
(d) The care services provided by the family member do not duplicate those that another party is being paid to provide;
(e) The FMV of the asset transferred is comparable to the FMV of the care services provided;
(f) The time for which care services are claimed is reasonable based on the kind of services provided;
(g) Compensation has been paid as the care services were performed or with no more time delay than one month between the provision of the service and payment; and
(h) There is a written agreement:
(i) Describing the terms of the exchange;
(ii) Stating that the transferred asset is considered payment for the care services provided; and
(iii) Signed by the client and family member prior to the date these services began.
(3) The department considers the transfer of an asset in exchange for care services given by a family member that does not meet the criteria as described under subsection (2) as the transfer of an asset without adequate consideration.
(4) The department considers the transfer of an asset or the establishment of a trust to be for the sole benefit of a person described in subsection (1)(e), if the transfer or trust:
(a) Is established by a legal document that makes the transfer irrevocable; and
(b) Provides for spending all assets involved for the sole benefit of the individual on a basis that is actuarially sound based on the life expectancy of that individual;
(c) Produces a tangible benefit as defined in WAC 388-513-0001; and
(d) Is paid out in equal monthly installments or budgeted as if paid out in equal monthly installments within the actuarial life expectancy of the beneficiary.
(5) If the transfer or trust does not meet the criteria described in (4)(a), (b), (c) and (d), the asset or trust will be considered available when determining eligibility.
(6) If a client or the client's spouse transfers an asset within the look-back period described in WAC 388-513-1365 without receiving adequate compensation, the result is a penalty period in which the client is not eligible for LTC services. If a client or the client's spouse transfers an asset on or after March 1, 2003, the department must establish a penalty period as follows:
(a) If a single or multiple transfers are made within a single month, then the penalty period:
(i) Begins on the first day of the month in which the transfer is made; and
(ii) Ends on the last day of the number of whole days found by dividing the total uncompensated value of the assets by the statewide average daily private cost for nursing facilities at the time of application.
(b) If multiple transfers are made during multiple months, then the transfers are treated as separate events and multiple penalty periods are established that:
(i) Begin on the latter of:
(A) The first day of the month in which the transfer is made; or
(B) The first day after any previous penalty period has ended and end on the last day of the whole number of days as described in subsection (6)(a)(ii).
(7) If an asset is sold, transferred, or exchanged, the portion of the proceeds:
(a) That is used within the same month to acquire an excluded resource described in WAC 388-513-1360 does not affect the client's eligibility;
(b) That remain after an acquisition described in subsection (7)(a) becomes an available resource as of the first day of the following month.
(8) If the transfer of an asset to the client's spouse includes the right to receive a stream of income not generated by a transferred resource, the department must apply rules described in WAC 388-513-1330 (6) through (8).
(9) If the transfer of an asset for which adequate compensation is not received is made to a person other than the client's spouse and includes the right to receive a stream of income not generated by a transferred resource, the length of the penalty period is determined and applied in the following way:
(a) The total amount of income that reflects a time frame based on the actuarial life expectancy of the client who transfers the income is added together;
(b) The amount described in subsection (9)(a) is divided by the statewide average daily private cost for nursing facilities at the time of application; and
(c) A penalty period equal to the number of whole days found by following subsections (6)(a) and (b) and (9)(a) and (b) is applied that begins on the latter of:
(i) The first day of the month in which the client transfers the income; or
(ii) The first day of the month after any previous penalty period has ended.
(10) A penalty period for the transfer of an asset that is applied to one spouse is not applied to the other spouse, unless:
(a) Both spouses are receiving LTC services; and
(b) A division of the penalty period between the spouses is requested.
(11) If a client or the client's spouse disagrees with the determination or application of a penalty period, that person may request a hearing as described in chapter 388-02 WAC.
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3201.2"Annuity" means a policy, certificate or contract that is an agreement between two parties in which one party pays a lump sum to the other, and the other party agrees to guarantee payment of a set amount of money over a set amount of time. The annuity may be purchased at one time or over a set period of time and may be bought individually or with a group. It may be revocable or irrevocable. The party guaranteeing payment can be an:
(1) Individual; or
(2) Insurer or similar body licensed and approved to do business in the jurisdiction in which the annuity is established.
"Beneficiary" means an individual(s) designated in the trust who benefits from the trust. The beneficiary can also be called the grantee. The beneficiary and the grantor may be the same person.
"Designated for medical expenses" means the trustee may use the trust to pay the medical expenses of the beneficiary. The amount of the trust that is designated for medical expenses is considered an available resource to the beneficiary. Payments are a third party resource.
"Disbursement" or "distribution" means any payment from the principal or proceeds of a trust, annuity, or life estate to the beneficiary or to someone on their behalf.
"Discretion of the trustee" means the trustee may decide what portion (up to the entire amount) of the principal of the trust will be made available to the beneficiary.
"Exculpatory clause" means there is some language in the trust that legally limits the authority of the trustee to distribute funds from a trust if the distribution would jeopardize eligibility for government programs including Medicaid.
"Grantor" means an individual who uses his assets or funds to create a trust. The grantor may also be the beneficiary.
"Income beneficiary" means the person receiving the payments may only get the proceeds of the trust. The principal is not available for disbursements. If this term is used, the principal of the trust is an unavailable resource.
"Irrevocable" means the legal instrument cannot be changed or terminated in any way by anyone.
"Life estate" means an ownership interest in a property only during the lifetime of the person(s) owning the life estate. In some cases, the ownership interest lasts only until the occurrence of some specific event, such as remarriage of the life estate owner. A life estate owner may not have the legal title or deed to the property, but may have rights to possession, use, income and/or selling their life estate interest in the property.
"Principal" means the assets that make up the entity. The principal includes income earned on the principal that has not been distributed. The principal is also called the corpus.
"Proceeds" means the income earned on the principal. It is usually interest, dividends, or rent. When the proceeds are not distributed, they become part of the principal.
"Pooled trust" means a trust meeting all of the following conditions:
(1) It contains funds of more than one disabled individual, combined for investment and management purposes;
(2) It is for the sole benefit of disabled individuals (as determined by SSA criteria);
(3) It was created by the disabled individuals, their parents, grandparents, legal guardians, or by a court;
(4) It is managed by a nonprofit association with a separate account maintained for each beneficiary; and
(5) It contains a provision that upon the death of the individual, for any funds not retained by the trust, the state will receive all amounts remaining in the individual's separate account up to the total amount of Medicaid paid on behalf of that individual.
"Revocable" means the legal instrument can be changed or terminated by the grantor, or by petitioning the court. A legal instrument that is called irrevocable, but that can be terminated if some action is taken, is revocable for the purposes of this section.
"Sole-benefit trust" means an irrevocable trust established for the sole-benefit of a spouse, blind or disabled child, or disabled individual. In a sole-benefit trust no one but the individual named in the trust receives benefit from the trust in any way either at the time the trust is established or at any time in the future. A sole-benefit trust may allow for reasonable costs to trustees for management of the trust and reasonable costs for investment of trust funds.
"Special needs trust" means ((a)) an irrevocable trust
meeting all of the following conditions:
(1) It is for the sole benefit of a disabled individual (as determined by SSA criteria) under sixty-five years old;
(2) It was created by the individual's parent, grandparent, legal guardian, or by a court; and
(3) It contains a provision that upon the death of the individual, the state will receive the amounts remaining in the trust up to the total amount of Medicaid paid on behalf of the individual.
"Tangible benefit" means an asset that is producing income consistent with its fair market value (FMV), which is used for the sole benefit of a spouse, blind or disabled child, or disabled individual.
"Testamentary trust" means a trust created by a will from the estate of a deceased person. The trust is paid out according to the will.
"Trust" means property (such as a home, cash, stocks, or other assets) is transferred to a trustee for the benefit of the grantor or another party. The department includes in this definition any other legal instrument similar to a trust. For annuities, refer to WAC 388-561-0200.
"Trustee" means an individual, bank, insurance company or any other entity that manages and administers the trust for the beneficiary.
"Undue hardship" means the client would be unable to meet shelter, food, clothing, and health care needs if the department applied the transfer of assets penalty.
[Statutory Authority: RCW 74.04.050, 74.08.090, and 74.09.500. 01-06-043, § 388-561-0001, filed 3/5/01, effective 5/1/01.]
(2) The department disregards trusts established, on or before April 6, 1986, for the sole benefit of a client who lives in an intermediate care facility for the mentally retarded (ICMR).
(3) For trusts established on or before August 10, 1993 the department counts the following:
(a) If the trust was established by the client, client's spouse, or the legal guardian, the maximum amount of money (payments) allowed to be distributed under the terms of the trust is considered available income to the client if all of the following conditions apply:
(i) The client could be the beneficiary of all or part of the payments from the trust;
(ii) The distribution of payments is determined by one or more of the trustees; and
(iii) The trustees are allowed discretion in distributing payments to the client.
(b) If an irrevocable trust doesn't meet the conditions under subsection (3)(a) then it is considered either:
(i) An unavailable resource, if the client established the trust for a beneficiary other than the client or the client's spouse; or
(ii) An available resource in the amount of the trust's assets that:
(A) The client could access; or
(B) The trustee distributes as actual payments to the client and the department applies the transfer of assets rules of WAC 388-513-1365 or 388-513-1364.
(c) If a revocable trust doesn't meet the description under subsection (3)(a):
(i) The full amount of the trust is an available resource of the client if the trust was established by:
(A) The client;
(B) The client's spouse, and the client lived with the spouse; or
(C) A person other than the client or the client's spouse only to the extent the client had access to the assets of the trust.
(ii) Only the amount of money actually paid to the client from the trust is an available resource when the trust was established by:
(A) The client's spouse, and the client did not live with the spouse; or
(B) A person other than the client or the client's spouse; and
(C) Payments were distributed by a trustee of the trust.
(iii) The department considers the funds a resource, not income.
(4) For trusts established on or after August 11, 1993:
(a) The department considers a trust as if it were established by the client when:
(i) The assets of the trust, as defined under WAC 388-470-0005, are at least partially from the client;
(ii) The trust is not established by will; and
(iii) The trust was established by:
(A) The client or the client's spouse;
(B) A person, including a court or administrative body, with legal authority to act in place of, or on behalf of, the client or the client's spouse; or
(C) A person, including a court or administrative body, acting at the direction of or upon the request of the client or the client's spouse.
(b) Only the assets contributed to the trust by the client are available to the client when part of the trust assets were contributed by any other person.
(c) The department does not consider:
(i) The purpose for establishing a trust;
(ii) Whether the trustees have, or exercise, any discretion under the terms of the trust;
(iii) Restrictions on when or whether distributions may be made from the trust; or
(iv) Restrictions on the use of distributions from the trust.
(d) For a revocable trust established as described under subsection (4)(a) of this section:
(i) The full amount of the trust is an available resource of the client;
(ii) Payments from the trust to or for the benefit of the client are income of the client; and
(iii) Any payments from the trust, other than payments described under subsection (4)(d)(ii), are considered a transfer of client assets.
(e) For an irrevocable trust established as described under subsection (4)(a) of this section:
(i) Any part of the trust from which payment can be made to or for the benefit of the client is an available resource. When payment is made from such irrevocable trusts, we will consider the payments as:
(A) Income to the client when payment is to or for the client's benefit; or
(B) The transfer of an asset when payment is made to any person for any purpose other than the client's benefit;
(ii) A trust from which a payment cannot be made to or for the client's benefit is a transfer of assets. For such a trust, the transfer of assets is effective the date:
(A) The trust is established; or
(B) The client is prevented from receiving benefit, if this is after the trust is established.
(iii) The value of the trust includes any payments made from the trust after the effective date of the transfer.
(5) Trusts established on or after August 11, 1993 are not considered available resources if they contain the assets of either:
(a) A person sixty-four years of age or younger who is disabled as defined by SSI criteria (as described in WAC 388-503-0510) and the trust:
(i) Is irrevocable;
(ii) Is established for the sole benefit of this person by their parent, grandparent, legal guardian, or a court; and
(((ii))) (iii) Stipulates that the state will receive all
amounts remaining in the trust upon the death of the client,
the end of the disability, or the termination of the trust, up
to the amount of Medicaid spent on the client's behalf; or
(b) A person regardless of age, who is disabled as defined by SSI criteria (as described in WAC 388-503-0510), and the trust is managed by a nonprofit association which:
(i) Is irrevocable;
(ii) Maintains separate accounts for each trust beneficiary; and
(((ii))) (iii) May pool such separate accounts only for
investment and fund management purposes; and
(((iii))) (iv) Stipulates that either:
(A) The state will receive all amounts remaining in the client's separate account upon the death of the client, the end of the disability, or the termination of the trust, up to the amount of Medicaid spent on the client's behalf; or
(B) The funds will remain in the trust to benefit other disabled beneficiaries of the trust.
(6) ((The department considers payments made from trusts
in subsection (5) to be unearned income.
(7))) The department considers payments made from trusts to be unearned income.
(7) A Sole-Benefit Trust established on or after March 1, 2003 will be considered an unavailable resource if:
(a) It meets the definition of Sole-Benefit in WAC 388-561-0001;
(b) It is paid out, or budgeted as if paid out, in equal monthly amounts within the actuarial life expectancy of the beneficiary;
(c) The institutionalized spouse is designated as the beneficiary for the assets contributed by him/herself if the community spouse dies; and
(d) It produces a tangible benefit (see WAC 388-561-0001).
(8) A Sole-Benefit Trust established on or after March 1, 2003 that is not scheduled to be paid out in equal monthly amounts, can still be considered an unavailable resource if:
(a) It meets the conditions described in subsection (7)(a), (c), and (d) of this section;
(b) The full pay out is within the actuarial life expectancy of the client; and
(c) The client:
(i) Changes the scheduled pay out into equal monthly payments within the actuarial life expectancy of the beneficiary; or
(ii) Requests that the department calculate and budget the payments as if they were paid out in equal monthly payments within the actuarial life expectancy of the beneficiary. The income from the trust remains unearned income to the beneficiary.
(9) The Sole-Benefit Trust must pay out all assets for the "sole benefit" of the individual on a basis that is actuarially sound based on the life expectancy of the individual involved. If the trust does not provide this, the assets in the trust will be considered an available resource when determining eligibility.
(10) The department will only count income from trusts and not the principal, if:
(a) The beneficiary has no control over the trust; and
(b) It was established with funds of someone other than the client, spouse or legally responsible person.
(((8))) (11) This section does not apply when a client
establishes that undue hardship exists.
(((9))) (12) WAC 388-513-1364, 388-513-1365, and
388-513-1366 applies when the department determines that a
trust or a portion of a trust is a transfer of assets.
[Statutory Authority: RCW 74.04.050, 74.08.090, and 74.09.500. 01-06-043, § 388-561-0100, filed 3/5/01, effective 5/1/01.]