MGE 216988 (07/14/2025)
Transfer of life insurance proceeds to honor deceased’s wishes was divestment

Preliminary Recitals

Pursuant to a petition filed on February 10, 2025, under Wis. Stat. § 49.45(5), and Wis. Admin. Code § HA 3.03(1), to review a decision by the Dunn County Department of Human Services regarding an application for Institutional Medical Assistance (MA), a hearing was held on May 14, 2025, by telephone. The hearing was rescheduled twice, pursuant to the joint request of the parties, to allow them an opportunity to reach informal resolution. The hearing was held open 21 days after the hearing to allow Petitioner and the agency to file additional documentation regarding a transfer of assets made by Petitioner and an additional ten days for the agency to file a response to Petitioner’s submission. The agency filed an additional 7 documents on May 20, 2025. Petitioner filed an additional 40 pages on May 27. The agency did not file any reply to Petitioner’s post-hearing submission.

The issues for determination are whether the agency correctly found that Petitioner divested $40,010 and that she is therefore subject to a 117 day penalty period; whether the agency correctly imposed the penalty period from January 1, 2025 through April 25, 2025; and whether the agency correctly denied Petitioner’s application for Institutional Medical Assistance based on a finding that her assets exceeded the program asset limit from October 2024 through December 2024.

There appeared at that time the following persons:

PARTIES IN INTEREST:

Petitioner:
—

Respondent:
Department of Health Services
1 West Wilson Street, Room 651
Madison, WI 53703
By: Dayna Stellrecht
Dunn County Department of Human Services
808 Main Street
PO Box 470
Menomonie, WI 54751

ADMINISTRATIVE LAW JUDGE:
Teresa A. Perez
Division of Hearings and Appeals

Findings of Fact

1. Petitioner (CARES # —) is an unmarried resident of Barron County who has resided in a skilled nursing facility since October 2024.
2. Petitioner filed an application for Institutional Medical Assistance on November 8, 2024 and requested that program eligibility begin as of October 1, 2024. That application was reopened in February 2025.
3. Petitioner is the joint owner of a checking account and the sole owner of a savings account, both of which are held by —. Her sister, —, is the other owner of the checking account but it is Petitioner’s income and funds that are deposited into the account.
4. In November 2019, Petitioner was the beneficiary of a life insurance policy and a 401K owned by another sister who passed away in 2019. The total proceeds were approximately $90,000. Petitioner’s Testimony.
5. —, with Petitioner’s permission, withdrew $5,000 from the joint checking account on September 20, 2024 so that she could pay for anticipated expenses associated with Petitioner’s relocation from California to a skilled nursing facility in Wisconsin. — ultimately used those funds to buy Petitioner an airline ticket from California to Wisconsin, ground medical transportation, new clothing, personal care items, snacks, and medical bills.
6. —, with Petitioner’s permission, withdrew $35,010 on September 26, 2024 to honor their deceased sister’s wish that they share the proceeds of her life insurance policy. See Agency’s Ex. B and Agency Post Hearing Submission.
7. Petitioner’s monthly Social Security payment is deposited into the checking account on or about the 3rd day of every month. Her Social Security deposit was $1,823 from October 2024 through December 2024, $1,868 in January 2025, $1,323.30 In February 2025, $1,683 in March 2025, and $1,683 in April 2025. See Agency Exhibit B and Agency Post-Hearing Submission.
8. As of the last day of the following months, Petitioner’s checking account balance was as follows: October 2024 – $1,091.80; November 2024 – $30; December 2024 – $6.96; January 2025 – $1,870.07; February 2025 – $1,335.34; March 2025 – $47.20; April 2025 – $1,782.39.
9. As of the last day of the following months, Petitioner’s savings account balance was as follows: September 2024 – $3,292.58; October 2024 – $2,000.03; November 2024 – $2,025.04; December 2024 – $2,050.06; January 2025 – $1,870.07; February 2025 – $2,000.09; March 2025 – $2,025.11; $2,050.13. See Agency Exhibit B and Agency Post-Hearing Submission.
10. By notice dated November 27, 2024, the agency informed Petitioner that she was not eligible for “Medicaid” in October 2024 because her assets exceeded the program limit, that she was not eligible in November 2024 because “the person around whom Medicaid eligibility was based may now be eligible for a different Medicaid subprogram.” See Agency Exhibit A.
11. By notice dated February 13, 2025, the agency again informed Petitioner that she was not eligible for “Medicaid” in October 2024 because her assets exceeded the program limit, that she was not eligible in November 2024 because “the person around whom Medicaid eligibility was based may now be eligible for a different Medicaid subprogram.” In addition, the February 13, 2025 notice stated that Petitioner was not eligible for “Nursing Home Long-Term Care” (i.e., Institutional Medical Assistance) as of November 1, 2024 because her assets exceeded the program limit; that she had divested $40,010 and was subject to a 117 day penalty period as a result; and that the divestment penalty period would run from November 1, 2024 through February 25, 2025. See Agency Exhibit E.
12. By notice dated April 15, 2025, the agency informed Petitioner that she was not eligible for Nursing Home Long-Term Care from October 2024 through December 2024 or in February 2025 because her assets exceeded the program limit but she was eligible in January 2025 because her assets were under the program limit in that particular month. The April 15, 2025 notice restated that Petitioner would be subject to a 117 day divestment penalty period but indicated that it would not begin running until January 1, 2025, when the agency determined Petitioner’s assets were under the program limit, and that the penalty would run through April 27, 2025. See Agency Exhibit I.
13. By notice dated May 14, 2025, the agency informed Petitioner that she was not enrolled in Nursing Home Long-Term care from February 1, 2025 through March 31, 2025 because her assets exceeded the program limit, that she was eligible for “Nursing Home Long-Term Care” as of April 1, 2025 because her assets were under the asset limit in that month, but that the previously established 117 day divestment penalty period would run from January 1, 2025 through April 27, 2025 and that she would begin receiving benefits as of April 28, 2025. See Agency Post-Hearing Submission and Testimony of D. Stellrecht.
14. Petitioner filed an appeal on February 10, 2025 to dispute the agency’s finding that she divested assets and to request that her benefits begin as of October 1, 2024.

Discussion

There are two primary issues to address: 1.) whether Petitioner divested assets, and 2.) whether the Petitioner’s countable assets exceeded the program limit and, if so, when. These issues are addressed below.

Divestment

A divestment is defined to include transfers of income, non-exempt assets, and homestead property which belong to an institutionalized person or her spouse for less than fair market value. Medicaid Eligibility Handbook (MEH) §17.2; see also, Wis. Admin. Code §DHS 103.065(4)(a); Wis. Stat. §49.453(2); 42 U.S.C. §1396p(c)(1). When a divestment occurs within five years prior to the date an institutionalized individual files an application for long term care Medical Assistance benefits (i.e., “lookback period”) or at any time thereafter, that individual will generally be subject to a penalty period (i.e., a period during which she will not receive Medicaid benefits despite satisfying financial and non-financial eligibility requirements).

The length of a divestment penalty period is calculated by dividing the divested amount by the average daily nursing home private pay rate in effect at the time of the application ($315.61 as of January 1, 2024; $340.99 as of January 1, 2025). MEH §17.3.2 and App. 39.4.6. For divestments that occur prior to the date of application, the penalty period will begin on the first date that meets the following three criteria: the person has applied for Institutional Medical Assistance; the person has entered an institution; and the person meets all other program eligibility requirements. Id. at 17.3.3.

Here, the agency contended that Petitioner divested $40,010 in September 2024. Petitioner acknowledged that during September 2024, withdrawals of $5,000 and $35,010 were made from the joint checking account that she owns with her sister. Petitioner and her sister, —, appeared at hearing and explained that another sister, before dying in 2019, had made it known to Petitioner that she wanted her life insurance proceeds to be split between Petitioner and —. — further testified that she decided to leave the life insurance funds in the joint account with Petitioner when they were first deposited because she did not need the money at the time but that when Petitioner relocated from California to Wisconsin in September 2024, those funds were withdrawn.

Neither Petitioner nor — asserted that they were both named beneficiaries of the life insurance policy. Rather, Petitioner indicated that she was the sole beneficiary of their now-deceased sister’s life insurance policy (as well as a 401K account). Although Petitioner’s desire to honor her deceased sister’s wish to share the life insurance proceeds is honorable, Petitioner was the named beneficiary, and thus legal owner, of those funds and she made the decision to transfer a portion of those funds to — and she made that decision approximately five years after those proceeds were paid to her and just weeks prior to filing an application for Long Term Care Medicaid. Under these circumstances, I find that the agency properly found that the $35,010 withdrawal made on September 26, 2024 was a divestment.

Petitioner testified that the $5,000 withdrawal made in September 2024 was given to — so that — could help Petitioner by purchasing necessities associated with relocating from California to Wisconsin and paying bills (e.g., an airplane ticket from California when Petitioner relocated; medical transportation, personal care items; clothing, a tablet, a table, and medical bills). Petitioner had not previously provided information regarding that $5,000 withdrawal to the agency because she did not consider it to be a gift to her sister and thus did not understand it to be relevant to her benefit application. The hearing record was therefore held open to allow Petitioner to provide documentation to demonstrate that — was making purchases and paying for bills on Petitioner’s behalf at that time.

Given Petitioner’s health condition, it is reasonable to believe that she needed to rely on a family member to help with such tasks and the documentation that Petitioner provided after the hearing, which included copies of credit card statements, on-line orders from stores including —, —, —, and bills from health care providers with written payment notations, effectively corroborated her testimony in that regard. I therefore find that the $5,000 withdrawal was not a divestment.

The evidence in the hearing record established that Petitioner divested $35,010. This matter will therefore be remanded to the agency to update its records to reflect this reduced divestment amount and to recalculate the penalty based on that reduced amount.

Eligibility and Assets

To be eligible for Nursing Home Long Term Care / Institutional Medical Assistance, an individual who does not have a community spouse, may not own countable, available assets in excess of $2,000. Medicaid Eligibility Handbook (MEH) §§16.1, 27.5.1, and 39.4.1.

The agency contended that Petitioner’s assets exceeded the program asset limit from October 2024 – December 2024 and in February and March 2025. The agency therefore concluded that the divestment penalty period could not begin to run until January 1, 2025—the date that her assets were first under the asset limit. If, however, Petitioner’s assets were under $2,000 in an earlier month, the divestment penalty period would both start and end earlier; thereby, allowing Petitioner to begin receiving benefits earlier.

The agency offered copies of bank statements that covered the following dates: August 27, 2024 through April 23, 2025. The statements included itemized transactions for the checking account during that full period of time. In addition, the agency offered a screen print that showed checking account transactions through May 7, 2025. The bank records offered appear to have itemized savings transactions only for August 24, 2024 through September 25, 2024 and from March 6, 2025 through April 23, 2025. Based on the best evidence in the record, I found that the checking account and savings account balances as of the end of each relevant month were as indicated in Findings of Fact Nos. 8 and 9.

One of the agency representatives testified that the agency determined that Petitioner was only slightly over the asset limit and that is reflected in the various About Your Benefits Notices. But, the agency did not provide any printouts showing the specific figures that they used in their calculations. The way the agency should have calculated Petitioner’s countable assets was to subtract the amount of her Social Security deposit from the amount of her assets at the end of each of the months in question. As best I can tell from the documents that were provided, it does not appear that the agency subtracted her Social Security amount. Though, it is hard to be sure of that since the agency did not provide detailed information about how it calculated Petitioner’s countable assets.

When the agency recalculates the divestment period based on the finding discussed above which reduces the divestment amount from $40,010 to $35,010, the agency must also review its monthly asset calculations and, if it did not do so previously, it must subtract the Social Security benefit amount paid in each of the months at issue (October 2024 – April 2025) from Petitioner’s combined checking and savings account balance at the end of each of those months. If the agency finds that, after subtracting Petitioner’s Social Security deposit, her assets were under $2,000 during any or all of those months, the agency must then determine whether / how that affects the time period during which the divestment penalty is applied. The agency must provide Petitioner written notice of these updated calculations and, if Petitioner disagrees with them, she will have the right to file a new appeal.

As the agency correctly observed at hearing, a divestment penalty period must begin as of the first day of the first month that an individual would have been otherwise eligible for Long Term Care Medical Assistance. Here, that means that Petitioner’s divestment penalty period would begin on October 1, 2024 if the agency finds that Petitioner’s assets at the end of October 2024 were under $2,000 after subtracting her October 2024 Social Security deposit.

Finally, I note that an undue hardship request was discussed during the hearing. As I stated at that time, Petitioner has a separate right to appeal any decision regarding an undue hardship request but that issue is not within the scope of this appeal.

Conclusions of Law

1. Petitioner divested $35,010 in September 2024 when she transferred a portion of life insurance proceeds that were paid to her as named beneficiary to her sister.
2. A $5,000 withdrawal from Petitioner’s checking account made in September 2024 to allow her sister to buy necessities and pay bills on Petitioner’s behalf was not a divestment.
3. The evidence in the record did not establish whether the agency correctly calculated Petitioner’s countable assets from October 2024 through April 2025.

THEREFORE, it is

Ordered

That the matter is remanded to the agency to take the following steps: (1) reduce Petitioner’s divestment amount to $35,010 and recalculate the divestment penalty period, (2) review the manner in which Petitioner’s countable assets were calculated each month from October 2024 through April 2025 and ensure that the Social Security amount deposited into her checking account was not included in the asset total for the month in which the deposit occurred; and (3) issue Petitioner a new notice that includes information showing how her countable assets were calculated for the months of October 2024 – April 2025, the length of the newly calculated divestment penalty period, the dates during which the penalty period will run, and the first date that she will receive Long Term Care Medical Assistance benefits. The agency must comply with these instructions within ten days of the date of this decision.

[Request for a rehearing and appeal to court instructions omitted.]