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A refresher on divestment

2/15/2021

 
​What is a divestment?   
A divestment is a gift, sale, or transfer for less than fair market value.  A divestment can take many different forms:  a cash gift, a sale of a home for less than its current value, adding someone’s name to a property deed, disclaiming an inheritance, or paying on debt the person is not legally obligated to pay for. 
 
Why is it important to know about divestments? 
People applying for long-term care Medicaid benefits such as FamilyCare, IRIS, Partnership, Pace, and Institutional Medicaid will be screened to determine if any divestments were made in the five years prior to their application.   Note:  Divestments are also relevant for eligibility for Supplemental Security Income (SSI), but the penalty is calculated differently. 

How does a divestment impact eligibility for long-term care Medicaid?
The agency that processes Medicaid applications will calculate a divestment penalty that will render the applicant ineligible for long-term Medicaid for a specific period of time.  The current divestment divisor is $303.38 per day (according to Operations Memo 20-27, effective January 1, 2021).  To calculate a person’s divestment penalty, take the total amount divested and divide it by $303.38.  The result is the number of days that a person will be ineligible for long-term care Medicaid programs. 

For example, if a person gave away $100,000, then take 100,000 and divide it by 303.38. The answer is 329.62, which is rounded down to 329.  That means this person would be ineligible for long-term care Medicaid for 329 days (approximately 11 months). 
 
What else is important to know about divestments? 
Medicaid presumes that family members perform work and provide care to other family members gratuitously.  Said another way, Medicaid assumes that the person who is performing the services or providing the care is not expecting to be paid.  However, sometimes payment is expected and appropriate.  In that case, there must be a signed and notarized contract in place between the two parties prior to the services being rendered and payment made.  Otherwise, Medicaid will count those payments to family members as divestments.  For more information, read the Medicaid Eligibility Handbook section 17.8.   
 
It is also important to note that sometimes a transaction may appear to be a divestment, but upon further investigation, may not be a divestment at all.  For example, someone may sell their home for less than the fair market value, which would seem to be a divestment.  However, if there was a fire in the home and it was no longer structurally sound and needed a lot of repairs, it could be sold in “as is” condition for much less than it was previously worth.  In those cases, pictures, insurance claim forms, and statements from a realtor can provide verification that the transaction was not a divestment. 
 
Finally, remember that transactions between family members are always highly scrutinized.  Keep good records, save receipts, take pictures, and create written agreements to substantiate the understanding of both parties.   

This article and more can be found in Our Prairie du Chien Office February Newsletter. 

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  • Home
  • About Us
    • Youth in Transition
    • Long Term Care
    • Transportation Services
    • Caregiver Support
    • Wellness and Prevention
    • Veterans
    • Governing Board >
      • Agendas and Minutes >
        • 2020 Agendas and Minutes
        • 2021 Agendas and Minutes
        • 2022 Agendas and Minutes
  • Our Specialists
  • Dementia Care Specialist
  • Resources
  • Contact
    • Juneau County Office
    • Crawford County Office
    • Richland County Office
    • Regional Office
  • News
    • Newsletters
  • Events
  • Volunteer