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 CLIENT ALERT: TRANSFER PENALTY
Under the MaineCare rules, a “penalty” is
imposed when an individual or his spouse transfers assets and receives less
than fair market value in return. The penalty is a period of ineligibility
for MaineCare nursing home and assisted living benefits. The period of
ineligibility runs from the date of the transfer.
This spring, the Maine Legislature directed DHHS to change the transfer
penalty calculation by December 31, 2005, in two respects: first, by
adopting a “rounding up” rule; second, by updating the current penalty
divisor of $3,917.
On July 6, 2005, MaineCare Program Manager Robert Thibodeau issued a
response to inquiries from Maine elder law attorneys. DHHS will start to
apply the new rounding up rule to any transfers made on or after July 1,
2005. With the rounding up method, the amount of total transfers made in a
month is divided by the applicable divisor and the quotient is rounded up to
determine the months of ineligibility. For example, if the divisor is
$3,917, a transfer of $10,000 causes 3 months of ineligibility ($10,000 ÷
$3,917 = 2.5, rounded up to 3), and a transfer of $1,000 causes 1 month of
ineligibility ($1,000 ÷ $3,917 = .2, rounded up to 1).
But rounding up will only be used for applications that seek benefits
beginning on or after the effective date of the new rule. That date will
likely be on or after November 1, 2005. This means that if an individual
expects to apply for benefits within the next several months (July, August,
September or October), DHHS continues to operate with the existing rules. A
transfer of $7,500 will create a one-month period of ineligibility; a
transfer of $3,800 will not create any penalty.
However, for applications seeking benefits commencing after the adoption of
the new rule, Mr. Thibodeau has stated: “The old divisor [of $3,917] will be
used for the [rounding up method] for transfers taking place from July 1,
2005 until the effective date of the new rules. We will use the ‘rounding
up’ method with the new divisor starting the effective date of the new
rules.”
According to this position, Skelton Law Offices is – for the moment -
recommending that clients who expect to seek MaineCare benefits that
commence in or after November limit monthly transfers made between July 1st
and the effective date of the new rules to no more than $3,900.
Please note that this recommendation may change. Under federal law, the
divisor in effect on the date of the application is the divisor that is to
be used to calculate an asset transfer penalty. Maine elder law attorneys
have brought this to the attention of Mr. Thibodeau in a July 20th letter.
Skelton Law Offices will advise its clients if DHHS changes its opinion
about the divisor to be used for transfers during this interim period.
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