5721 Exempt Transfers

5721 Exempt Transfers

The following transfers are exempt and shall not result in a penalty period:

1. A transfer which was fully executed prior to the look-back period.  
2. A transfer of the LTC individual’s home to:  
   1. The spouse of the LTC individual.   
   2. A child of the LTC individual who is under the age of 21 or an adult child who meets the blindness or disability criteria of 2662.   
   3. A sibling of the LTC individual who has an equity interest in the home and who was residing in the home for a period of at least 1 year immediately before the date the individual entered the LTC arrangement.   
   4. An adult child of the LTC individual other than described in item (b) above who was residing in the home for a period of at least 2 years immediately before the date the individual entered the LTC arrangement and who provided care to the individual which permitted him or her to reside at home rather than in the LTC arrangement.  Residence in the home must be verified. The care provided must be documented and related to the LTC individual’s need. Documentation from a third party, preferably a physician or other medical professional, must support the individual’s claim regarding the type of care provided and the duration of such care. The type of care provided is not limited to medical services only, household services are also included if the child provided all, or nearly all, household tasks.   
3. A transfer of property, to the LTC individual’s child, regardless of age, who meets the blindness or disability criteria of 2662.  
4. A transfer by the LTC individual into a trust for the sole benefit of:
   1. The LTC individual’s child who meets the blindness and disability criteria of 2662.
   2. An individual under age 65 years who meets the blindness and disability criteria of 2662.  
5. A transfer of an exempt asset by the LTC individual or spouse if the resource would have been exempt at the time of transfer. Except the following are considered non-exempt transfers:  
   1. The home and surrounding property (including the transfer of a life estate interest only).  
   2. Income-producing real or personal property with a value greater than $6000 or included in a trade or business in which the individual is actually participating in the production of income as outlined in 5334 and 5430 (8).  Multiple transfers of such property occurring within the same month shall be regarded as a single transfer for purposes of establishing the $6000 limit as well as the total uncompensated value.   
   3. A purchase of an annuity, promissory note, contract sale, loan or mortgage is evaluated as a transfer of property according to 5722 regardless of exempt vs non-exempt status. 
   4. Any otherwise exempt resource that was transferred by means of a constructive or step transaction transfer as described in 5722(9).   
6. A transfer of property that has been approved by the agency prior to transfer. Prior approval is only provided to current applicants or ongoing recipients. Individuals requesting prior approval must submit a request, in writing, with the following information:
   1. A description of the specific property transferred. For real property, include the legal description.   
   2. The equity value in the property.  
   3. A description of how the proposed transfer will occur (e.g., sale, trade, contract on time); to whom it will be transferred; and the amount and source of compensation the applicant/recipient or spouse is expected to receive.  
   4. Information regarding any previous or ongoing attempts to sell or receive adequate compensation from the transfer, including any attempts to dispose of the property for fair market value.  The Operational Management, or designee, will review the request in consultation with KDHE-DHCF Policy and issue a decision. A notification regarding the decision shall be sent to the applicant/recipient.   
7. A transfer of property which was ultimately voided by the Estate Recovery Unit (1725.4).
8. A transfer of property between spouses or a transfer of property to another person for the sole benefit and support of the community spouse.  
9. A transfer of property where fair market value was received or is expected to be received within an actuarially sound period. (See 5722.1).  
10. A transfer of property that would otherwise be subject to a transfer of property penalty per  5724  which has been returned to the individual or spouse prior to the filing of an application or request for long term care assistance is not considered an inappropriate transfer. The value of the returned property shall not be subject to a transfer of property penalty.  Any transferred property that remains unreturned at the time of application or request shall be subject to a transfer of property penalty.

    The following provisions apply where a transfer of property penalty has been imposed on an applicant or recipient and some, or all, of the transferred property has been returned.

    1. Full return of property – If the transferred property, or the fair market equivalent of the property, has been returned in full to the individual or spouse, the transfer of property penalty shall be voided.  If the transferred property is returned in the same month the transfer occurred, the period of ineligibility does not apply.  If the transferred property is returned in a subsequent month, the period of ineligibility continues through the month the property is returned with the penalty period voided effective the month after.  
    2. Partial return of property – If a portion of the transferred property, or fair market equivalent of the property, has been returned to the individual or spouse, the transfer of property remains in place.  The penalty period shall not be adjusted or modified in any manner.  Only a full return of property as indicated in subsection a. above may void the penalty.  
    3. Return of property defined – For purposes of this section, a return of property to the individual or spouse is not restricted to only a direct transfer back to the individual or spouse.  A return also includes instances where expenses or debts of the individual (such as nursing home or other medical bills, home mortgage, credit card debt, etc.) have been paid on the individual’s behalf by the recipient of the transferred property.  Any payment made which results in a gain or benefit to the individual shall be considered a return even if the individual had no actual possession of or control over the returned property.
    4. Valuation of returned property – The value of cash or property which is readily converted to cash (such as bank or investment accounts) is the assigned value at the time returned to the individual or spouse.  The value of non-cash property which is based on a subjective appraisal (such as vehicles, real estate and other property) is the appraised value at the time of return.

       If the same non-cash property that was transferred is returned, the agency shall assume the full value of the property has been returned.  A nominal change in value due to normal wear-and-tear or market fluctuation shall be disregarded.

       However, if there has been a substantial change in the property value due to an improvement (structure added to the real estate increasing the value) or wasting (structure demolished decreasing the value), the new verified value of the property shall be used.

11. A transfer of future property rights where the present ownership rights of the property are retained. An example is a transfer-on-death deed where ownership of the real estate is not transferred until the owner’s death. See 1725.1(1) for the definition of an expanded estate for estate recovery purposes.