Asset Transfers and Qualifying for ALTCS

Not all transfers trigger a period of ineligibility. There are some exceptions to the rule against making gifts.

Revised January 2019 | More about Long-Term Care Legal Services

The Arizona Long Term Care System (ALTCS) presumes that all gifts made within the 60 months preceding the application for ALTCS benefits were made with the intent to qualify for benefits. This will trigger a period of ineligibility, on the theory that those assets could have been used to pay for the individual’s care.

Not all transfers, however, trigger a period of ineligibility. Federal and state laws contain various exceptions to the rule against making gifts.

The Home

Generally speaking, the applicant's home is exempt from being counted as a resource, as long as the applicant’s home:

• is occupied by the applicant and/or the applicant’s spouse;
  
• is titled in the name of the applicant and/or the spouse (i.e., not a Trust); and
  
• has a total equity value that is less than a specific value (which, for 2019, is $585,000).
  

However, when title to the applicant’s home is transferred to another, this will trigger a period of ineligibility unless the transfer is made to the applicant’s:

• spouse;
  
• sibling who has an equity interest in the home and who has been residing in the home for a period of at least one year immediately before the date the applicant becomes institutionalized;
  
• child (if under age 21);
  
• child (if blind or permanently and totally disabled); or
  
• child (other than a child as described above) who (a) was residing in the home for at least two years immediately before the date the individual becomes institutionalized, and (b) as determined by the state, provided care to the applicant that allowed the applicant to reside at home, rather than in an institution or facility.

Transfers to a Spouse

Because assets held in the name of either spouse are included when determining eligibility, ALTCS does not care which spouse owns the asset. Arizona law provides that there is no transfer penalty if:

• the asset was transferred to the individual’s spouse or to another for the sole benefit of the individual’s spouse; or
  
• the asset was transferred from the individual’s spouse to another for the sole benefit of the individual’s spouse.
  

This means that an institutionalized spouse is allowed to transfer unlimited assets to the spouse or to someone else for the sole benefit of the spouse. The law states, however, that any assets transferred to another for the sole benefit of the spouse must be spent for the benefit of the spouse within a timeframe corresponding to the spouse's life expectancy. This is particularly applicable when an annuity, purchased by the applicant’s spouse, pays out in a series of monthly payments to that spouse. These “Medicaid Annuities” have a number of specific rules that must be complied with, so be sure to seek competent advice from an elder law attorney familiar with these rules, as well as a competent investment advisor regarding the purchase of the annuity.

TRANSFERS TO A CHILD OF ASSETS OTHER THAN THE HOME

No transfer penalties will be imposed if the asset was transferred to the individual’s child, or to a trust established solely for the benefit of the individual’s child, so long as the child is either blind or permanently and totally disabled as defined by the individual state program or as defined by Supplemental Security Income rules.

Undue Hardship

In the event a transfer was made resulting in a period of ineligibility, there may be a chance you can convince ALTCS that the ineligibility will result in an undue hardship. This will not be an easy task, however, because in order to claim undue hardship you must meet all of the following conditions:

• the beneficiary must be otherwise eligible for ALTCS benefits;
  
• the beneficiary must be unable to obtain medical care without receipt of ALTCS; and
  
• the beneficiary must be experiencing an emergency life-threatening episode and, without medical care, be in imminent danger of death as determined by the ALTCS director.
  

LEGAL GUIDANCE

As you can see, ALTCS eligibility is complicated, and advice from an attorney who frequently works in this area of the law is highly recommended. At Frazer Ryan, we work hard to say up to date on the law and on methods to ensure that all eligible individuals are properly prepared to qualify for ALTCS. We encourage you to give us a call to discuss your particular situation with us.