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  • Writer's pictureArwen Rasmussen

Divestments: What Are They And Why Are They Important?

By the GWAAR Legal Services Team

What is a Divestment?

Divestment is a term related to long-term care Medicaid. It is defined as the giving away of something for less than fair market value. This could mean giving something away as a gift or for less than the item is worth in the commercial market. A divestment can be done intentionally by giving someone money, or unintentionally by not doing something that the person should have done.

Here are some examples of divestments:

  • selling one’s home at a discounted price;

  • adding a person’s name to the deed of a house if they did not pay towards the purchase of it;

  • giving away a life estate or remainder interest in a home property without being paid for it;

  • agreeing to waive a debt that is owed by another person;

  • adding a person’s name as a joint owner to a bank account, and then allowing that person to withdraw money from the account for their own personal spending;

  • paying off debts or loans that the person is not legally obligated to pay for;

  • donating more than 15% of a household’s annual income to a religious or charitable organization;

  • refusing to accept an inheritance, settlement, or other lump sum of money the person is entitled to;

Why is it important to be aware of divestment policy issues?

If a person makes a divestment, a divestment penalty period may be imposed upon them if they later apply for long-term care Medicaid benefits. For example, if a person makes a $100,000 divestment, then they will be ineligible for long-term care Medicaid for 323 days—that’s almost a full year!

Do divestment penalties apply to all forms of Medicaid?

No, divestment penalties only apply to long-term care Medicaid, including institutional Medicaid (in the nursing home or hospital), FamilyCare, IRIS, PACE, and Partnership. Divestment penalties do not apply to card-services Medicaid (BadgerCare+, MAPP, Medicaid deductible, categorically needy Medicaid, etc.). Under federal law, divestment penalties also do not apply to Medicare Savings Programs such as QMB, SLMB, and SLMB+.

If a divestment penalty is assessed but inaccurate, how can that be resolved? 

A person who is assessed a divestment penalty but believes it to be inaccurate can call the local Income Maintenance Consortium to discuss the situation. They can also file an appeal with the Division of Hearings and Appeals, a state agency that decides Medicaid appeals in Wisconsin. Be aware that there is a 45-calendar day appeal window and there are no provisions for late appeals.

Where can more information on divestments be found? 

For more information, look at the Medicaid Eligibility Handbook, section 17 or the WI DHS website.

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