Chapter 49

49.453(4)(ac)2. 2. An elective withdrawal.

49.453(4)(ac)3. 3. A request to change the distribution of the annuity.

49.453(4)(ac)4. 4. An election to annuitize the contract.

49.453(4)(ac)5. 5. A change in ownership.

49.453(4)(ag) (ag) For the purposes of sub. (2), whenever a covered individual or his or her spouse, or another person acting on behalf of the covered individual or his or her spouse, transfers assets to an irrevocable annuity, or transfers assets by promissory note or similar instrument, in an amount that exceeds the expected value of the benefit, the covered individual or his or her spouse transfers assets for less than fair market value. A transfer to an annuity, or a transfer by promissory note or similar instrument, is not in excess of the expected value only if all of the following are true:

49.453(4)(ag)1. 1. The periodic payments back to the transferor include principal and interest that, at the time that the transfer is made, is at least at one of the following:

49.453(4)(ag)1.a. a. For an annuity, promissory note or similar instrument that is not specified under subd. 1. b. or par. (am), the applicable federal rate required under section 1274 (d) of the Internal Revenue Code, as defined in s. 71.01 (6).

49.453(4)(ag)1.b. b. For an annuity with a guaranteed life payment, the appropriate average of the applicable federal rates based on the expected length of the annuity minus 1.5 percent.

49.453(4)(ag)2. 2. The terms of the instrument provide for a payment schedule that includes equal periodic payments, except that payments may be unequal if the interest payments are tied to an interest rate and the inequality is caused exclusively by fluctuations in that rate.

49.453(4)(am) (am) Paragraph (ag) 1. does not apply to a variable annuity that is tied to a mutual fund that is registered with the federal securities and exchange commission.

49.453(4)(b) (b) The amount of assets that is transferred for less than fair market value under par. (ag) is the amount by which the transferred amount exceeds the expected value of the benefit.

49.453(4)(c) (c) The department shall promulgate rules specifying the method to be used in calculating the expected value of the benefit, based on 26 CFR 1.72-1 to 1.72-18, and specifying the criteria for adjusting the expected value of the benefit based on a medical condition diagnosed by a physician before the assets were transferred to the annuity, or transferred by promissory note or similar instrument. In calculating the amount of the divestment when a transfer to an annuity, or a transfer by promissory note or similar instrument, is made, payments made to the transferor in any year subsequent to the year in which the transfer was made shall be discounted to the year in which the transfer was made by the applicable federal rate specified under par. (ag) on the date of the transfer.

49.453(4)(cm) (cm) Paragraphs (ag) to (c) apply to annuities purchased before February 8, 2006, for which no transaction has occurred on or after February 8, 2006.

49.453(4)(d) (d) For purposes of sub. (2), the purchase of an annuity by an institutionalized individual or his or her community spouse, or anyone acting on their behalf, shall be treated as a transfer of assets for less than fair market value unless any of the following applies:

49.453(4)(d)1. 1. The state is designated as the remainder beneficiary in the first position for at least the total amount of medical assistance paid on behalf of the institutionalized individual.

49.453(4)(d)2. 2. The state is named as a beneficiary in the 2nd position after the community spouse or a minor or disabled child and is named in the first position if the community spouse or a representative of the minor or disabled child disposes of any remainder for less than fair market value.

49.453(4)(d)3. 3. The annuity satisfies the requirements under par. (e) 1. or 2.

49.453(4)(e) (e) For purposes of sub. (2), the purchase of an annuity by or on behalf of an annuitant who has applied for medical assistance for nursing facility services or other long-term care services described in sub. (2) is a transfer of assets for less than fair market value unless either of the following applies:

49.453(4)(e)1. 1. The annuity is either an annuity described in section 408 (b) or (q) of the Internal Revenue Code of 1986 or purchased with proceeds from any of the following:

49.453(4)(e)1.a. a. An account or trust described in section 408 (a), (c), or (p) of the Internal Revenue Code of 1986.

49.453(4)(e)1.b. b. A simplified employee pension, within the meaning of section 408 (k) of the Internal Revenue Code of 1986.

49.453(4)(e)1.c. c. A Roth IRA described in section 408A of the Internal Revenue Code of 1986.

49.453(4)(e)2. 2. All of the following apply with respect to the annuity:

49.453(4)(e)2.a. a. The annuity is irrevocable and nonassignable.

49.453(4)(e)2.b. b. The annuity is actuarily sound, as determined in accordance with actuarial publications of the office of the chief actuary of the social security administration.

49.453(4)(e)2.c. c. The annuity provides for payments in equal amounts during the term of the annuity, with no deferral and no balloon payments made.

49.453(4)(em) (em) Paragraphs (d) and (e) apply to all of the following:

49.453(4)(em)1. 1. Annuities purchased on or after February 8, 2006.

49.453(4)(em)2. 2. Annuities purchased before February 8, 2006, for which a transaction has occurred on or after February 8, 2006.

49.453(4c) (4c) Purchase of note, loan, or mortgage.

49.453(4c)(a) (a) For purposes of sub. (2), the purchase by an individual or his or her spouse of a promissory note, loan, or mortgage after February 8, 2006, is a transfer of assets for less than fair market value unless all of the following apply with respect to the note, loan, or mortgage:

49.453(4c)(a)1. 1. The repayment term is actuarially sound.

49.453(4c)(a)2. 2. The payments are to be made in equal amounts during the term of the loan, with no deferral and no balloon payment.

49.453(4c)(a)3. 3. Cancellation of the balance upon the death of the lender is prohibited.

49.453(4c)(am) (am) Notwithstanding par. (a), for purposes of sub. (2), the purchase of or entering into a promissory note by an individual or his or her spouse on or after July 14, 2015, is a transfer of assets for less than fair market value unless all of the following apply:

49.453(4c)(am)1. 1. The promissory note satisfies the requirements under par. (a) 1. to 3.

49.453(4c)(am)2. 2. The promissory note is negotiable, assignable, and enforceable and does not contain any terms making it unmarketable.

49.453(4c)(b) (b)

49.453(4c)(b)1. 1. The value of a promissory note purchased before July 14, 2015, a loan, or a mortgage that does not satisfy the requirements under par. (a) 1. to 3. is the outstanding balance due on the date that the individual applies for medical assistance for nursing facility services or other long-term care services described in sub. (2).

49.453(4c)(b)2. 2. The value of a promissory note purchased or entered into on or after July 14, 2015, that does not satisfy the requirements under par. (am) 1. and 2. is the outstanding balance due on the date that the individual applies for Medical Assistance for nursing facility services or other long-term care services described in sub. (2) or on the date that the individual’s eligibility for Medical Assistance for nursing facility services or other long-term care services described in sub. (2) is redetermined.

49.453(4m) (4m) Purchase of life estate. For purposes of sub. (2), the purchase by an individual or his or her spouse of a life estate in another individual’s home after February 8, 2006, is a transfer of assets for less than fair market value unless the purchaser resides in the home for at least one year after the date of the purchase.

49.453(5) (5) Care or personal services. For the purposes of sub. (2), whenever a covered individual or his or her spouse, or another person acting on behalf of the covered individual or his or her spouse, transfers assets to a relative as payment for care or personal services that the relative provides to the covered individual, the covered individual or his or her spouse transfers assets for less than fair market value unless the care or services directly benefit the covered individual, the amount of the payment does not exceed reasonable compensation for the care or services that the relative performs and, if the amount of the payment exceeds 10 percent of the community spouse resource allowance limit specified in s. 49.455 (6) (b) 1., the agreement to pay the relative is specified in a notarized written agreement that exists at the time that the relative performs the care or services.

49.453(6) (6) Common ownership. For purposes of sub. (2), if a covered individual holds an asset in common with another person in a joint tenancy, tenancy in common, or similar arrangement, the asset, or the affected portion of the asset, is considered to be transferred by the covered individual when an action is taken, either by the covered individual or by any other person, that reduces or eliminates the covered individual’s ownership or control of the asset.

49.453(7) (7) Certain authorizations. For the purposes of sub. (2), if a covered individual or his or her spouse authorizes another person to transfer, encumber, lease, consume or otherwise act with respect to an asset as though the asset belonged to that other person; if that other person exercises the authority in a way that causes the asset to be unavailable for the support and maintenance of the covered individual or his or her spouse; and if the covered individual does not receive fair market value for the asset, then the covered individual or his or her spouse transfers assets for less than fair market value at the time that the other person exercises the authority.

49.453(8) (8) Inapplicability.

49.453(8)(a) (a) Subsections (2) and (3) do not apply to transfers of assets if any of the following applies:

49.453(8)(a)1. 1. The assets are exempt under 42 USC 1396p (c) (2) (A), (B), or (C). To make a satisfactory showing to the state under 42 USC 1396p (c) (2) (C) and adjust the ineligibility period under sub. (3), the individual shall demonstrate that all of the assets transferred for less than fair market value, or cash equal to the value of the assets transferred for less than fair market, have been returned to him or her.

49.453(8)(a)2. 2. The department determines under the process under par. (b) that application of this section would work an undue hardship.

49.453(8)(b) (b) The department shall establish a hardship waiver process that includes all of the following:

49.453(8)(b)1. 1. The department determines that undue hardship exists if the application of subs. (2) and (3) would deprive the individual of medical care to the extent that the individual’s health or life would be endangered, or would deprive the individual of food, clothing, shelter, or other necessities of life.

49.453(8)(b)2. 2. A facility in which an institutionalized individual who has transferred assets resides is permitted to file an application for undue hardship on behalf of the individual with the consent of the individual or the individual’s authorized representative.

49.453(8)(b)3. 3. The department may, during the pendency of an undue hardship determination, pay the full payment rate under s. 49.45 (6m) for nursing facility services for up to 30 days for the individual who transferred assets, to hold a bed in the facility in which the individual resides.

49.453 History History: 1993 a. 437 ss. 74 to 92; 1997 a. 35; 1999 a. 9, 185; 2007 a. 20; 2013 a. 20, 92; 2015 a. 55.

49.453 Annotation A wife’s failure to assert a claim against her deceased husband’s estate for her statutorily granted share of the estate constituted an act of divestment. Tannler v. DHSS, 211 Wis. 2d 179, 564 N.W.2d 735 (1997), 96-0118.

49.453 Annotation The grantor of an irrevocable trust that allowed the grantor to live in trust property for the grantor’s life unless the grantor was found incompetent, in which case the trust could be terminated and the property distributed, did not divest an asset when the grantor was found incompetent and the trustee distributed the residence pursuant to the trust document. Artac v. DHFS, 2000 WI App 88, 234 Wis. 2d 480, 610 N.W.2d 115, 99-1523.

49.453 Annotation Although this section has specific requirements with which an annuity must comply, the initial question is whether the transfer of assets to the annuity is made for less than fair market value under sub. (2) (a). Buettner v. DHFS, 2003 WI App 90, 264 Wis. 2d 700, 663 N.W.2d 282, 01-0981.

49.453 Annotation An administrative determination that a nursing home resident’s purchase of a life estate in 66 percent of her son’s residence was a sham transaction of no value by which the purchaser divested herself of an annuity balloon payment was reasonable when she had entered a nursing home as permanent to the home, had lived there for five years with no realistic expectation of release, could not use the life estate at the time of purchase, and had no reasonable future expectation of being able to do so, and if the son sold the property, the life estate would be extinguished. Estate of Hagenstein v. DHFS, 2006 WI App 90, 292 Wis. 2d 697, 715 N.W.2d 645, 05-1303.

49.454 49.454 Treatment of trust amounts.

49.454(1) (1) Applicability.

49.454(1)(a) (a) Except as provided in sub. (4), this section applies to an individual with respect to a trust if assets of the individual or the individual’s spouse were used to form all or part of the corpus of the trust and if any of the following persons established the trust other than by will:

49.454(1)(a)1. 1. The individual.

49.454(1)(a)2. 2. The individual’s spouse.

49.454(1)(a)3. 3. A person, including a court or administrative body with legal authority to act in place of or on behalf of the individual or the individual’s spouse.

49.454(1)(a)4. 4. A person, including a court or administrative body, acting at the direction or upon the request of the individual or the individual’s spouse.

49.454(1)(b) (b) If the corpus of a trust under par. (a) includes assets of a person other than the individual or the individual’s spouse, this section applies only with respect to the portion of the trust attributable to the assets of the individual or the individual’s spouse.

49.454(2) (2) Treatment of revocable trust amounts. For purposes of determining an individual’s eligibility for, or amount of benefits under, medical assistance:

49.454(2)(a) (a) The corpus of a revocable trust is considered a resource available to the individual.

49.454(2)(b) (b) Payments from a revocable trust to or for the benefit of the individual are considered income of the individual.

49.454(2)(c) (c) Other payments from a revocable trust are considered transfers of assets by the individual subject to s. 49.453.

49.454(3) (3) Treatment of irrevocable trust amounts. For purposes of determining an individual’s eligibility for, or amount of benefits under, medical assistance:

49.454(3)(a) (a) If there are circumstances under which payment from an irrevocable trust could be made to or for the benefit of the individual, the portion of the corpus from which, or the income on the corpus from which, payment to or for the benefit of the individual could be made is considered a resource available to the individual, and payments from that portion of the corpus or income:

49.454(3)(a)1. 1. To or for the benefit of the individual, are considered income of the individual.

49.454(3)(a)2. 2. For any other purpose, are considered transfers of assets by the individual subject to s. 49.453.

49.454(3)(b) (b) Any portion of an irrevocable trust from which, or any income on the corpus from which, no payment could under any circumstances be made to or for the benefit of the individual, is considered to be an asset transferred by the individual subject to s. 49.453. The asset is considered to be transferred as of the date of the establishment of the trust, or, if later, the date on which payment to the individual was foreclosed. The value of the trust shall be determined for purposes of s. 49.453 by including the amount of any payments made from that portion of the trust after that date.

49.454(4) (4) Inapplicability. This section does not apply to any trust described in 42 USC 1396p (d) (4) or if the department determines, pursuant to procedures established by the department by rule, that the application of this section would work an undue hardship on an individual.

49.454 History History: 1993 a. 437.

49.454 Annotation Transfer of a disabled ward’s property to a newly-established “Medicaid Payback Trust” was in the ward’s best interest and authorized by sub. (4) and s. 880.19 (5) (b) [now s. 54.22]. Marjorie A.G. v. Dodge County Department of Human Services, 2003 WI App 52, 261 Wis. 2d 679, 659 N.W.2d 438, 02-1121.

49.454 Annotation Regardless of whether the asset held in an irrevocable trust is transferred as an annuity, it is nevertheless held in an irrevocable trust governed by this section, which specifically governs the treatment of trust amounts for purposes of medical assistance eligibility. Estate of Gonwa v. DHFS, 2003 WI App 152, 265 Wis. 2d 913, 668 N.W.2d 122, 02-2901.

49.454 Annotation Sub. (1) (a) requires that the assets of the individual were used to form all or part of the corpus of the trust. Sub. (1) (a) 4. plainly brings within this section trusts that are not established directly by an applicant or person legally authorized to act on behalf of the applicant but are indirectly established by the applicant in that the applicant directs or requests another person to establish the trust using the individual’s assets. Hedlund v. Department of Health Services, 2011 WI App 153, 337 Wis. 2d 634, 807 N.W.2d 672, 10-3070.

49.454 Annotation The documentary evidence in this case showed that a husband and wife transferred all of their property except for one checking account to their children, and, on the same day in the same document, the children transferred that property to the trust. The inference that the assets were transferred to the children for the purpose of establishing the trust for the parents’ benefit was a reasonable inference from the evidence and satisfied the requirement in sub. (1) (a) 4. that the children created the trust at the direction or upon the request of the parents. Even if other benefits resulted from the trust, it did not follow that the trust was not established at the parent’s direction or request. Hedlund v. Department of Health Services, 2011 WI App 153, 337 Wis. 2d 634, 807 N.W.2d 672, 10-3070.

49.455 49.455 Protection of income and resources of couple for maintenance of community spouse.

49.455(1) (1) Definitions. In this section:

49.455(1)(a) (a) “Community spouse” means an individual who is married to an institutionalized spouse.

49.455(1)(b) (b) “Consumer price index” means the consumer price index for all urban consumers, U.S. city average, as determined by the U.S. department of labor.

49.455(1)(c) (c) “Family member” means a minor or dependent child, dependent parent or dependent sibling of an institutionalized or community spouse who resides with the community spouse.

49.455(1)(d) (d) “Institutionalized spouse” means either an individual who is in a medical institution or nursing facility and is married to an individual who is not in a medical institution or nursing facility or an individual who receives services under a waiver under 42 USC 1396n (c) or (d) and is married to an individual who is not in a medical institution or nursing facility and does not receive services under a waiver under 42 USC 1396n (c) or (d).

49.455(1)(e) (e) “Resources” does not include items excluded under 42 USC 1382b (a) or (d) or items that would be excluded under 42 USC 1382b (a) (2) (A) but for the limitation on total value established under that provision.

49.455(2) (2) Applicability. The department shall use the provisions of this section in determining the eligibility for medical assistance under s. 49.46 or 49.47 and the required contribution toward care of an institutionalized spouse.

49.455(3) (3) Attribution of income.