17.8 Divesting by Paying Relatives

17.8.1 Introduction

Divestment may occur when an institutionalized person transfers resources to a relative in payment for care or services the relative provided to him or her and any of the conditions below are not met. A relative is anyone related to the institutionalized person by blood, marriage, or adoption.

Count all the payments for care and services that the institutionalized person made to the relative in the last 60 months. Payment can include 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: Kerry applies for community waivers on January 10. 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 Kerry received fair market value , it is not divestment.

Example 2: Jennifer enters a nursing home on December 12 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 people. They charge $2 for each meal. Jennifer's daughter provided 61 meals. The fair market value of the meals was $122. You determine Jennifer overpaid her daughter. The divested amount is $6,878 ($7,000-$122).

If the amount of total payment exceeds 10 percent of the community spouse asset share (see Section 18.4.3 Calculate the Community Spouse Asset Share), the institutionalized person must have a written, notarized agreement with the relative. The agreement must:
- Specify the service and the amount to be paid
- Exist at the time the service is provided.

Example 3: Rosemary enters a nursing home and applies for Medicaid on November 1, 2016. When asked if she has transferred any assets in the past 36 months, Rosemary indicates that she paid her daughter $10,000 in exchange for her daughter providing personal care for her over the past two years. This $10,000 payment would ordinarily be counted as a divestment since it is above 10 percent of Rosemary’s community spouse asset share; however, she shows you a written, notarized statement, dated October 9, 2014, in which she promises to pay $10,000 to her daughter for the specified care. As a result, there is no divestment.

If there is no community spouse, use 10 percent of the highest possible community spouse asset share indicated in Section 18.4.3 Calculate the Community Spouse Asset Share.

17.8.2 Room and Board

If an institutionalized person has made room and board payments to a relative, disregard them if both the following are true:

The payments do not exceed fair market value of the room and board.
The payments 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 one of the following is true:

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

This page last updated in Release Number: 18-01

Release Date: 04/13/2018

Effective Date: 04/13/2018