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Cash, Bank Accounts and Non-retirement Investments and Medicaid

Cash and Accounts

Monetary resources can typically be liquidated within 20 days. These include cash, savings accounts, checking accounts, money market accounts and the like. Medicaid always “counts” monetary assets when determining Medicaid eligibility. Specifically, 20 C.F.R § 416.1201(b) provides: “Liquid resources are cash or other property which can be converted to cash within 20 days, excluding certain nonwork days as explained in § 416.120(d). Examples of resources that are ordinarily liquid are stocks, bonds, mutual fund shares, promissory notes, mortgages, life insurance policies, financial institution accounts (including savings, checking, and time deposits, also known as certificates of deposit) and similar items. Liquid resources, other than cash, are evaluated according to the individual’s equity in the resources. (See § 416.1208 for the treatment of funds held in individual and joint financial institution accounts.)” Further, since most of these resources may be liquidated they are considered a resource. 20 C.F.R § 416.1201(a)(1).

Since many bank accounts are held jointly, this is a good place to discuss how Medicaid treats joint assets. The same would apply with other joint assets, such as investment accounts or realty. HCFA 64, § 3258.7 provides:

When an asset is held by an individual in common with another person or persons via joint tenancy, tenancy in common, joint ownership, or a similar arrangement, the asset (or affected portion of the asset) is considered to be transferred by the individual when any action is taken, either by the individual or any other person, that reduces or eliminates the individual’s ownership or control of the asset.

Under this provision, merely placing another person’s name on an account or asset as a joint owner might not constitute a transfer of assets subject, of course, to the specific circumstances of the situation. In such a situation, the individual may still possess ownership rights to the account or asset and thus have the right to withdraw all of the funds in the account or possess the asset at any time. Thus, the account or asset is still considered to belong to the individual. However, actual withdrawal of funds from the account or removal of the asset by the other person removes the funds or property from the control of the individual and so constitutes a transfer of assets. Also, if placing another person’s name on the account or asset actually limits the individual’s right to sell or otherwise dispose of the asset (e.g., the addition of another person’s name requires that the person agree to the sale or disposal of the asset where no such agreement was necessary before), such placement constitutes a transfer of assets.

Use regular Medicaid rules to determine what portion of a jointly held asset is presumed to belong to an applicant or recipient. This portion is subject to a transfer penalty if it is withdrawn by a joint owner. However, you must also provide an opportunity for the owners to rebut the presumption of ownership. If either the applicant/recipient or the other person can establish to your satisfaction that the funds withdrawn were, in fact, the sole property of and contributed to the account by the other person, and thus did not belong to the applicant/recipient, withdrawal of those funds should not result in the imposition of a penalty.

Since Medicaid always counts monetary resources, if the applicant’s account balance exceeds the applicable resource threshold, then the applicant is not eligible for Medicaid.

A concept that coincides with monetary assets is “availability.” Unavailable assets are not counted when determining Medicaid eligibility. Regarding availability, Tennessee Manual, Ch. 15, I.A.4 states: “Resources available to the client include those for which he has the right, authority, ability, or power to liquidate including those deemed available to him from a financially responsible relative and the uncompensated value of any transfer.” Most monetary assets will be available, but assets that legally cannot be liquidated to pay for nursing home care should be exempt. However, 20 C.F.R § 416.1201(a)(1) provides, “If a property right cannot be liquidated, the property will not be considered a resource of the individual (or spouse).” With this in mind, it is critical to determine whether State law permits liquidation of a resource.

Investments

Investments are resources such as stocks, mutual funds and bonds. The purpose of investments is to accumulate wealth to satisfy your needs in the future. These are the resources you want when planning for retirement because they tend to appreciate in value. Unfortunately, Medicaid treats these resources in the same way it treats monetary resources, meaning they are available resources. Generally, any stock or investment resource trading on a secondary market will fail the availability test at 20 C.F.R § 416.1201(a)(1). (Of notes, this is not necessary true of private placements which often have transferability restrictions).

By way of example in calculating how investments such as this are valued, the Georgia Manual, Section 2335, provides as follows:

Verify and document the following:

    • Ownership Interest: If the shares are owned jointly, assume that each owner owns an equal share.
    • Number of Shares Owned: Ask the individual to submit the stock certificate or most recent statement of account (including dividend account) from the firm that issued or is holding the stock. Document the system and case with a photocopy. If the individual does not
      have this documentation, have him/her obtain a statement from the firm. Provide assistance as needed.

Determine the countable resource value of shares of stock or mutual funds by multiplying the number of shares owned by the CMV of each share.

    • Current Market Value (CMV) of Each Share: The CMV of a stock as of the first moment of a given month is its closing price on the last business day of the preceding month.
      The value of over-the counter stock is shown on a bid and asked basis. Use the bid price as the CMV. The par value or stated value shown on some stock certificates is not the market value of the stock.
    • Consider the CMV of a mutual fund share to be the selling price (sell).

The closing price of a stock on a given day can usually be found in the next day’s newspaper.
If the value of a stock does not appear in a newspaper, contact a local securities firm. Provide the firm with the following information:

    • name of stock, bond, or mutual fund
    • type of stock, such as preferred or common
    • months for which values are needed.

Planning

In most  cases, planning with cash, bank accounts and transferable securities requires that these resources be liquidated and converted to exempt resources, that they be spent-down, converted to income, gifted, or some combination of the foregoing. For example, cash may be invested into an exempt homeplace. Cash may be spent staying home instead of going to a nursing home. Cash may be used to purchase an annuity or primissor note paying income to a community spouse.

For younger applicants, cash may be used to increase funding to a retirement account, or may be used to fund a special needs trust. Cash may also be transferred to a disabled child or to a sole benefit trust for a disabled person under the age of 65. And, as always, an applicant can mix and match available strategies. There is no requirement that an applicant put all of his or her eggs in one basket.

Note Regarding Retirement Funds

Although some states count retirement fund balances toward an applicant’s resource limit, Georgia (currently) does not. For that reason, retirement accounts are dealt with in a different section.

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