17.8 Divesting by Paying Relatives

17.8.1 Divesting by Paying Relatives Introduction

It is divestment when an institutionalized person transfers resources to a relative in payment for care or services the relative provided to him or her. A relative is anyone related to the institutionalized person by blood, marriage, or adoption.

Count all the payments for care and services which the institutionalized person made to the relative in the last 36 months. The form of payment includes cash, property, or anything of value transferred to the relative. It is not divestment if all of the following conditions exist:

The services directly benefited the institutionalized person.
The payment did not exceed reasonable compensation for the services provided.

"Reasonable compensation" is the prevailing local market rate for the service at the time the service is provided.

Example 1: Ms. Rain applies for community waivers on January 10, 1995. She paid her son $3,500 to remodel her bathroom the previous month. She shows that her son installed new tile and fixtures. You check with a local contractor who estimates the he would charge $4,000 for the same job. Since Ms. Rain received fair market value , it is not divestment.

Example 2: Ms. M. enters a nursing home on December 12, 1995, and applies for Medicaid. She reports she paid her daughter $7,000 in December for coming to her house each evening and fixing dinner for the previous two months. You check with a local agency that provides meals to homebound persons. They charge $2 for each meal. Ms. M.'s daughter provided 61 meals. The fair market value of the meals was $122. You determine Ms. M. overpaid her daughter. The divested amount is $6,878 ($7000-$122).

If the amount of total payment exceeds 10 percent of the community spouse asset share (see Section 18.4.3 Calculate the CSAS), the institutionalized person must have a written, notarized agreement with the relative. The agreement must:

Specify the service and the amount to be paid, and
Exist at the time the service is provided.

Example 3: Ms. A enters a nursing home and applies for Medicaid on November 1, 1996. When asked if she has transferred any assets in the past 36 months, she reveals that she has. She paid her daughter $10,000 in exchange for personal care that her daughter had provided to her the past two years. This $10,000 payment would ordinarily be counted as a divestment, since it is above 10 percent of Ms. A’s community spouse asset share.

But she shows you a written, notarized statement, dated October 9, 1994, in which she promises to pay $10,000 to her daughter for the specified care. Therefore, there is no divestment.

If there is no community spouse, use 10 percent of the highest possible CSAS in Section 18.4.3 Calculate the CSAS.

17.8.2 Room and Board

If an institutionalized person has made room and board payments to a relative, disregardAn amount not counted when determining a person's total net income. them if:

The payments do not exceed fair market value of the room and board, and
Are for periods when the institutionalized person was receiving the room and board.

If the room and board is paid after the person has been institutionalized, treat the payment as divestment unless:

The payment is only for the month immediately preceding the month he or she entered the institution, or
He or she provides a written lease that existed during the time he or she was receiving room and board from the relative.

This page last updated in Release Number: 08-01

Release Date: 02/01/08

Effective Date: 02/01/08