(1) DEFINITIONS. In this section and in s. 49.454: (a) “Assets” has the meaning given in 42 USC 1396p (h) (1). (am) “Covered individual” means an individual who is an institutionalized individual or a noninstitutionalized individual. (ar) “Community spouse” means the spouse of either the institutionalized person or the noninstitutionalized person. (b) “Disabled” has the meaning given in 42 USC 1382c (a) (3). (c) “Expected value of the benefit” means the amount that an irrevocable annuity will pay to the annuitant during his or her expected lifetime as determined under sub. (4) (c). (d) “Income” has the meaning given in 42 USC 1396p (h) (2). (e) “Institutionalized individual” has the meaning given in 42 USC 1396p (h) (3). (f) “Look-back date” means either of the following: 1m. For transfers made before February 8, 2006, the date that is 36 months before, or with respect to payments from a trust or portions of a trust that are treated as assets transferred by the covered individual under s. 49.454 (2) (c) or (3) (b) the date that is 60 months before: a. For a covered individual who is an institutionalized individual, the first date on which the covered individual is both an institutionalized individual and has applied for medical assistance. b. For a covered individual who is a noninstitutionalized individual, the date on which the covered individual applies for medical assistance or, if later, the date on which the covered individual, his or her spouse, or another person acting on behalf of the covered individual or his or her spouse, transferred assets for less than fair market value. 2m. For all transfers made on or after February 8, 2006, the date that is 60 months before the dates specified in subd. 1m. a. and b. (fm) “Noninstitutionalized individual” has the meaning given in 42 USC 1396p (h) (4). (g) “Reasonable compensation” means the prevailing local market rate of compensation for the service or care provided. (h) “Relative” means an individual who is related to another by blood, marriage or adoption. (i) “Resources” has the meaning given in 42 USC 1396p (h) (5). (j) “Trust” has the meaning given in 42 USC 1396p (d) (6). (2) INELIGIBILITY FOR MEDICAL ASSISTANCE FOR CERTAIN SERVICES. (a) Institutionalized individuals. Except as provided in sub. (8), if an institutionalized individual or his or her spouse, or another person acting on behalf of the institutionalized individual or his or her spouse, transfers assets for less than fair market value on or after the institutionalized individual’s look-back date, the institutionalized individual is ineligible for medical assistance for the following services for the period specified under sub. (3): 1. For nursing facility services. 2. For a level of care in a medical institution equivalent to that of a nursing facility. 3. For services under a waiver under 42 USC 1396n. (b) Noninstitutionalized individuals. Except as provided in sub. (8), if a noninstitutionalized individual or his or her spouse, or another person acting on behalf of the noninstitutionalized individual or his or her spouse, transfers assets for less than fair market value on or after the noninstitutionalized individual’s look-back date, the noninstitutionalized individual is ineligible for medical assistance for the following services for the period specified under sub. (3): 1. Services that are described in 42 USC 1396d (a) (7), (22) or (24). 2. Other long-term care services specified by the department by rule. (3) PERIOD OF INELIGIBILITY. (a) The period of ineligibility under this subsection begins on either of the following for an applicant for Medical Assistance: 1. In the case of a transfer of assets made before February 8, 2006, the first day of the first month beginning on or after the look-back date during or after which assets have been transferred for less than fair market value and that does not occur in any other periods of ineligibility under this subsection. 2. In the case of a transfer of assets made on or after February 8, 2006, the first day of a month beginning on or after the look-back date during or after which assets have been transferred for less than fair market value, or the date on which the individual is eligible for medical assistance and would otherwise be receiving institutional level care described in sub. (2) (a) 1. to 3. based on an approved application for the care but for the application of the penalty period, whichever is later, and that does not occur during any other period of ineligibility under this subsection. (ag) The period of ineligibility under this subsection for a transfer of assets made at the time the individual is receiving long-term care services through Medical Assistance begins on the first day of the month following the month in which the individual receives advance notice of the period of ineligibility. (b) Subject to par. (bc), the department shall determine the number of months of ineligibility as follows: 1. The department shall determine the total, cumulative uncompensated value of all assets transferred by the covered individual or his or her spouse on or after the look-back date. 2. The department shall determine the average monthly cost to a private patient of nursing facility services in the state at the time that the covered individual applied for medical assistance. 3. The number of months of ineligibility equals the number determined by dividing the amount determined under subd. 1. by the amount determined under subd. 2. (bc) In determining the number of months of ineligibility under par. (b), with respect to asset transfers that occur after February 8, 2006, the department may not round down the quotient, or otherwise disregard any fraction of a month, obtained in the division under par. (b) 3. (c) If the spouse of an individual makes a transfer of assets that results in a period of ineligibility under this section and otherwise becomes eligible for medical assistance, the department shall apportion the period of ineligibility between the individual and the spouse. The department shall promulgate rules establishing a reasonable methodology for apportioning a period of ineligibility under this paragraph. (4) IRREVOCABLE ANNUITIES, PROMISSORY NOTES AND SIMILAR TRANSFERS. (ac) In this subsection, “transaction” means any action taken by an individual that changes the course of payments to be made under an annuity or the treatment of the income or principal of an annuity, including all of the following: 1. An addition of principal. 2. An elective withdrawal. 3. A request to change the distribution of the annuity. 4. An election to annuitize the contract. 5. A change in ownership. (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: 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: 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). 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. 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. (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. (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. (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. (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. (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: 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. 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. 3. The annuity satisfies the requirements under par. (e) 1. or 2. (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: 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: a. An account or trust described in section 408 (a), (c), or (p) of the Internal Revenue Code of 1986. b. A simplified employee pension, within the meaning of section 408 (k) of the Internal Revenue Code of 1986. c. A Roth IRA described in section 408A of the Internal Revenue Code of 1986. 2. All of the following apply with respect to the annuity: a. The annuity is irrevocable and nonassignable. 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. c. The annuity provides for payments in equal amounts during the term of the annuity, with no deferral and no balloon payments made. (em) Paragraphs (d) and (e) apply to all of the following: 1. Annuities purchased on or after February 8, 2006. 2. Annuities purchased before February 8, 2006, for which a transaction has occurred on or after February 8, 2006. (4c) PURCHASE OF NOTE, LOAN, OR MORTGAGE. (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: 1. The repayment term is actuarially sound. 2. The payments are to be made in equal amounts during the term of the loan, with no deferral and no balloon payment. 3. Cancellation of the balance upon the death of the lender is prohibited. (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: 1. The promissory note satisfies the requirements under par. (a) 1. to 3. 2. The promissory note is negotiable, assignable, and enforceable and does not contain any terms making it unmarketable. (b) 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). 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. (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. (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. (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. (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. (8) INAPPLICABILITY. (a) Subsections (2) and (3) do not apply to transfers of assets if any of the following applies: 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. 2. The department determines under the process under par. (b) that application of this section would work an undue hardship. (b) The department shall establish a hardship waiver process that includes all of the following: 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. 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. 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.
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