5430 Exempt Personal Property

5430 Exempt Personal Property - The resource value of the following classifications of personal property shall be exempt. However, if such property is transferred to a trust, it loses its exempt status as the trust becomes the legal owner of the property.

"See Policy Memo #02-10-02 re: "Prearranged funeral and burial agreements and excess funeral funds".

ABLE Act Accounts – Achieving a Better Life Experience (ABLE) accounts are exempt as a resource for all medical assistance programs. Qualified distributions from the account for disability and housing expenses are not countable as a resource in the month received or the following months. Distributions for other than qualifying disability and housing expenses are countable as a resource the month following the month received. See 6410(1).
Burial Funds - Burial funds of up to $1,500 each (plus any interest that has accumulated in that fund beginning with the month of application but no earlier than November 1, 1984) for members of the assistance plan which are separately identifiable and clearly designated as set aside for each member's burial expenses are exempt.

Burial funds are defined as revocable burial contracts and trusts as well as other revocable burial arrangements. They also can include cash, financial accounts (e.g., savings or checking accounts), or other financial instruments with a definite cash value (e.g., stocks, bonds, C.D.'s, cash surrender value of life insurance policies, etc.). Such instruments do, however, need to meet the "separately identifiable and clearly designated" criteria below.

A fund shall be considered separately identifiable if it is set up in a separate account and not commingled with any other funds except funds for burial purposes such as a prepaid contract fund for burial merchandise as described in item (2) below. It shall meet the "clearly designated" requirement if the account is noted "for burial purposes only" or if the client provides a signed written statement attesting to the fact that the funds have been set aside and are intended for burial purposes only. Failure to meet either of these conditions shall result in the fund not being excluded under this provision. If the fund is exempted and the client withdraws all or a portion of the funds, the amount withdrawn shall be considered as a nonexempt resource and, if transferred, subject to provisions of 5700.

This provision is not applicable to any irrevocable funeral agreements (e.g., $7,000 agreement established per K.S.A. 16-303) as such agreements are already exempt due to their legal unavailability per item (9) below. However, the $1,500 amount which can be exempted under this provision must be reduced by the amount of any such irrevocable agreements except to the extent that it represents excludable burial spaces (see item 2), as well as the face value of all life insurance policies which do not exceed the $1,500 face value limitation in accordance with 5430 (15)). The face value of life insurance policies which exceed this $1,500 limit shall not reduce the amount that can be exempted for burial purposes. Thus, for example, an individual could own a non-exempt $7,000 face value life insurance policy and also have an exempted $1,500 burial fund in addition.
Burial Spaces - Burial spaces are totally exempt for each member of the assistance plan. Burial spaces are defined as conventional grave sites, crypts, mausoleums, caskets, urns, and other repositories which are traditionally used for the remains of deceased persons. Vaults, headstones, and grave markers would also be included in this definition as well as monies set aside for opening and closing the grave. Burial spaces purchased through a revocable or irrevocable prepaid contract would be exempt under this provision including the account in which the funds are deposited under the contract and the interest that accrues on such funds.
Cash Assets - Cash assets which may be traced to income exempted as income and a resource per 6410 (applicable subsections) are exempted.
Commingled Funds (Food Assistance Only) - Exempted monies that are kept in a separate account, and that are not commingled in an account with other nonexempt funds, shall retain their resource exemption for an unlimited period of time. The resources of students and self-employed households which are exempted as provided in 5430 (8) and 6410 and are commingled in an account with nonexempt funds shall retain their exemption for the period of time over which they have been prorated as income or in the case of students, for the period of time they are intended to cover. All other exempt monies which are commingled in an account with nonexempt funds shall retain their exemption for 6 months from the date they are commingled. After 6 months from the date of commingling, all funds in the commingled account shall be counted as a resource.
Contracts for Care (Medical Assistance Only) -
1. Monies paid as part of a prospective agreement to receive medical or assistive services from an unlicensed individual or entity are considered an available resource, unless the criteria below are met. The entire amount of funds paid under the contract are considered available. However, the countable value is reduced by the cost for services that have been provided and documented since the beginning of the contract.
  
  Examples of services provided under such a contract include, but are not limited to: health and welfare monitoring; case management; medication management; and long term care. Contracts providing for similar services are also considered under the provisions of this section.
  
  The contract is considered fully countable unless all of the following exist:
  1. A written contract is executed prior to providing or paying any service. The contract must specify services to be provided and the rates of such services.
  2. The contracted amount paid for services is consistent with the market rate for such services. If there is no established rate, the federal minimum wage shall be used.
  3. The provider of the service is reporting all monies as income to the appropriate state and federal governmental revenue agencies as required by law (e.g., IRS).
  4. Any amounts due under the contract are paid after the services are rendered.
  5. The agreement is revocable.
  6. Upon the death of the individual, the contract ceases.
    
    Contracts which meet item (iv) above, but do not meet the other criteria may be subject to transfer of property penalty. Services provided outside of a contract may also be considered an uncompensated transfer (see 5721 (9)).

Monies paid to a licensed health care professional or facility, including those paid to a continuing care retirement community (CCRC), for purposes of gaining entry into a facility or community, or securing services are considered an available resource if all of the conditions listed below are met:

The entrance fee can be used to pay for care under the terms of the entrance contract should other resources of the individual be insufficient;

The entrance fee, or remaining portion, is refundable when the individual dies or terminates the contract and, if living in a facility or CCRC, leaves the facility; and

The entrance fee does not confer an ownership interest in the business or CCRC.

The entire amount of the entrance fee or prepayment paid under the contract is countable if these three conditions are met. However, the countable value is reduced by the cost for services that have been delivered and paid strictly by the entrance fee, if such services can be documented.

Payments made as part of the provider's normal billing cycle are not considered available. For example, a payment made to a nursing facility billing residents early in the month for care provided in that month are not considered countable under this provision.

NOTE: The entrance fee is an unavailable resource if the three conditions listed above are not met. In addition, payment of an unavailable, non- refundable entrance fee shall not be considered an uncompensated transfer. It shall be assumed under this provision that the individual received fair market value for payment of the entrance fee.

Contract Sales, Promissory Notes and Loans - A contract sale, promissory note, loan or other agreement to repay a debt is exempt only if the proceeds are considered as income and the income is consistent with the repayment terms and conditions set forth in the written contract.

If the debtor is not meeting the terms and conditions of the contract, the debt is considered a potential resource and the individual is required to pursue recovery per 2124.1.

For LTC requests, these and similar agreements must be evaluated under the transfer of property provisions of 5722 (6) . In the absence of an enforceable contract, the transfer is considered a gift.
Escrow Accounts - For all programs, escrow accounts established for families participating in the Family Self-Sufficiency Program through the Department of Housing and Urban Development. Interest earned on such accounts shall also be exempted as income.
Essential for Employment - Property which is essential to the employment or self-employment of the individual is exempt. This would include property such as tools of a tradesman, farm machinery, livestock, stock and inventory of self-employed person that are reasonable and necessary in the production of goods or services, vehicles, business checking account, or other business property where the person is still actively involved as a manager. Income from such property would usually be considered as earned income.

If the property is not in current use, it may be exempted under this provision as long as the individual expects to resume its use within 1 year of the date of last use. This period can be extended an additional year if the individual has a disabling condition which prevents him or her from resuming the activity within the first year. Documentation is required. If the individual does not expect to resume use of the property, it shall be counted in full.
Property essential to the self-employment of a household member engaged in farming shall continue to be excluded for one year from the date the household member terminates the self-employment farming.
Funeral Agreements - Irrevocable funeral agreements and trusts as specified in K.S.A. 16-303. This statute permits individuals to establish such agreements for payment of designated burial space items (see item 2) and up to $7,000 for basic funeral services. All items and services must be clearly identified in the contract. Amounts designated for services in excess of $7,000 are revocable under the law and would be considered available. No limits are applicable for the burial space items but the cost for each item must be clearly indicated. The accumulated interest and earnings from the total amount established (including amounts exceeding $7,000) are also irrevocable and would be considered exempt.

As the statute did not become effective until July 1, 1982, prearranged funeral agreements entered into prior to this date are to be regarded as revocable unless they were amended after this time to make the first $7,000, plus the total interest and earnings which have accumulated since the date of the amendment, irrevocable. Amounts in excess of this remain revocable. If such amendment has not been made, the agreement would have to be viewed under the $1,500 burial exemption referenced in item (1) above.

The law applies not only to specific funeral agreements but also to such things as burial or life insurance policies which irrevocably assign proceeds to the funeral home for the specific purpose of funding the funeral. This would include specific burial policies (such as Pierce National Life and Purple Shield) as well traditional life insurance policies. The assignment must include a statement acknowledging excess funds not used following payment of the actual funeral must be paid to the estate recovery unit in accordance with K.S.A. 16-304. The Irrevocable Assignment of Benefits of Life Insurance/Annuity Policy (see Miscellaneous Forms) is generally used to accomplish the assignment. However, the transfer of assignment is not considered complete until documentation is received back from the insurance company. Alternate forms may be considered, but are to be approved by EES Administration Policy and Estate Recovery staff prior to acceptance. In lieu of irrevocable assignment ownership rights may be irrevocably assigned to the funeral home. Also see Policy Memo 02-10-02 . However, in all situations, a formal funeral agreement with a funeral home specifying the type and value of funeral services to be provided must be verified.

NOTE: Irrevocable funeral agreements from other states are to be honored regardless of the amount and, therefore, would not be considered as an available resource. However, because some states do not require an itemized statement, this may not be available.

It is important to note that if the individual owns more than one funeral agreement, only the first $7,000, plus total interest and earnings that have accumulated under all of the agreements, may be made irrevocable. The excess amount obtained by summing all of the monies in the accounts is revocable.
Home Consumption Items - Items for home consumption. These items consist of produce from a small garden, a small flock of chickens or other fowl, a cow, a pig, or other animals used to meet the food requirements of the family.
Home Sale Proceeds - The proceeds from the sale of a home are exempt if the proceeds are conserved for the purchase of a new home and the conserved funds are expended or committed to be expended within 3 months of the sale. Any of the proceeds so conserved that are used for any other purpose shall be considered under the transfer of property provisions for persons in institutional or HCBS living arrangement. See 5720.
Household Goods - Household equipment and furnishings in use or only temporarily not in use. These consist of such items as dishes, tableware, cooking utensils, canning equipment, bedding, and household linens, beds, mattresses, stoves, and refrigerators.
Income Producing Property - Property (other than cash assets), which produces income consistent with its fair market value is exempt in full, even if used only on a seasonal basis. This would include property such as vehicles, farm equipment or business inventory which are rented or part of an ongoing business where the individual is no longer actively involved in the management of the business. Inventory also includes livestock or grain in storage which are sold on a regular basis as the market permits. Generally income from such property would be considered unearned income. See 6313 (1) regarding self-employment income.

When it is necessary to determine if the property is producing income consistent with its fair market value, local realtors, tax assessors, the Small Business Administration, or other similar sources may be contacted to determine the prevailing rate of return (e.g., square foot, rental, etc.) for similar usage of the property is the area. If it is determined that the property is not producing income consistent with its fair market value (for instances, the property is being leased for a token payment), such property would be counted as a resource. However, if the property was leased for a return that was comparable to other property in the area leased for similar purposes, it would be considered as producing income consistent with its fair market value and would not be considered a resource.

If the property is not in current use, it may be exempted under this provision as long as the individual expects its use to resume within 1 year of the date of last use. If the individual does not expect use of the property to resume, the property shall be counted in full.
Individual Development Accounts (IDAs) - IDAs which meet the guidelines specified in 6410.
Insurance shall be considered as follows:
1. Insurance with no potential cash surrender value (such as term insurance, burial insurance, or potential Veteran's, OASDI or railroad retirement death benefits) is totally exempt.
2. For MS, QMB, LMB, and QWD, other life insurance not exceeding $1,500 face value, owned by any applicant or recipient family member is exempt. Face value does not include and is not increased by accumulated dividends, but is considered to be decreased by an outstanding policy loan. If the total face value of all nonexempt life insurance policies owned by any one individual exceeds $1,500, the total cash surrender value of those policies is a nonexempt resource. Cash surrender value does not include accumulated dividends or interest and is decreased by an outstanding policy loan.
  
  An otherwise resource disqualifying life insurance policy that has been assigned to the state shall be considered an exempt resource for medical assistance. The policy must meet the following conditions to be exempted under this policy:
  1. The cash surrender value of the policy exceeds the allowable medical assistance resource limit.
  2. The assignment is an alternative to liquidating the policy in order to meet the medical assistance resource limit.
  3. The assignment is for an amount not to exceed the amount of benefits paid under the medical assistance coverage for the individual.
  4. The policy has been irrevocably collaterally assigned to the state Medicaid program via the ES-3171 assignment form or by another form approved by KDHE-DHCF.
3. For cash and food assistance the cash value of life insurance policies is exempt.
Kansas Investments Developing Scholars (K.I.D.S.) Match Grant Program - K.I.D.S. is a form of a Learning Quest 529 account available to a limited number of participants with earnings below 200% of the poverty level. A Participant Account and a Match Account are established through Learning Quest. The amount in both the Participant Account and in the Match Account are exempt as resources. Refer to 6410 Educational Income.
Learning Quest and Other 529 Educational Savings Plans - These plans are exempt for food assistance and TANF purposes effective 10/1/08.
Pension Plans - Pensions plans shall be considered as follows:
1. Food Assistance - The cash value of pension plans or funds, including 401 (k) plans, IRAs, and Keough plans are exempt. All retirement plans are exempt for food assistance purposes. See a list of excluded retirement plans in the Appendix, item T-12
2. Cash Programs - The cash value of pension plans or funds are exempt.
  
  Exceptions: Keough plans that involve no contractual relationship with individuals who are not household members, individual retirement accounts (IRA's) and 401(k) plans are not exempt. In addition, if an individual is retired or claiming disability and not drawing benefits to which they are entitled, the cash value of the pension plan or fund is not exempt.
3. Medical Programs - The cash value of pension plans or funds are exempt if any of the following applies:
  1. The value of the fund is exempt if the person would have to terminate employment in order to obtain any payment. Plans which can be converted to periodic payments are exempt if they are converted to periodic payments by the month following the month they are eligible for conversion.
  2. The value of any pension fund is exempt if the person is not retired or claiming permanent disability.
  3. Funds held in work-related pension funds, including Keough plans, and IRA’s owned by an applicant/recipients spouse or parent, if such a spouse or parent is not applying for or receiving MS, QMB, LMB or QWD are exempt.
  4. For Working Healthy, pension and retirement funds of the applicant/recipient are exempt. For other plan members the fund is only exempt if items (i), (ii) or (iii) above apply.
  Exceptions: If the pension plan or fund does not meet one of the above criteria for medical, the plan or fund is not exempt. In addition, if an individual is retired or claiming disability and not drawing benefits to which they are entitled, the cash value of the pension plan or fund is not exempt.
  
  For any non-exempt fund, the cash value is the amount that can be withdrawn after any penalty deduction. Deductions for tax payments do not reduce the cash value. Each plan must be evaluated to determine if the money can be withdrawn and the cash value. Example: A client has $5,000 in a non exempt fund. If cashed out, the value, including the penalty for early withdrawal is $4,800. The cash value to count towards resources is $4,800.
  
  NOTE: Loans taken against 401(k) plans are treated in accordance with 6410.
Personal Effects - Personal effects and keepsakes are exempt. Personal effects are items such as a watch, clothing, books, comb and brush. Personal keepsakes are items such as gifts kept for the sake of the giver, items with sentimental value, and the like. Family pets are also exempt under this provision.
Social Security and SSI Benefits - For MS, QMB, LMB, and QWD, a retroactive Social Security or SSI benefit received by the applicant/recipient or an excluded legally responsible person is exempt for the 9 months following the month of receipt.
TANF/SSI Recipients - For food assistance, the resources of any household member who receives TANF or SSI benefits shall be exempted for purposes of the Food Assistance Program. This includes resources jointly owned by recipients who receive TANF or SSI with those who do not.

Persons are considered recipients if their TANF or SSI benefits are recouped to the point that no actual payment is made. Persons are also considered recipients if their TANF is suspended for one month due to excess income per 1512.5. Persons not receiving TANF or SSI benefits who are receiving Medicaid only, including persons on MA/CM per KFMAM 2222, TransMed per KFMAM 2230, and 4 month extended eligibility per KFMAM 2240 are not considered TANF recipients. For households in which all members receive TANF or SSI, refer to 2510 for a description of the categorical eligibility provisions.

If the resource is countable for TANF purposes, it should be coded with the resource type code of "ZZ" (Categorically Eligible/Exempt Resource of AF/SSI Recipient). This code will continue to count the resource for TANF purposes, but will exempt it for food assistance purposes.

If the resource in question is exempt for TANF purposes, then it should be coded "XA" (Other Excluded All Programs). This code will exempt the resource for both TANF and food assistance purposes.

Coding of resources to exempt them for food assistance purposes can be done at either the time the resource is being entered on KAECSES (if it known the owner is a TANF or SSI recipient) or at the time the case fails the food assistance resource determination test and it is determined that the resource is owned by a TANF or SSI recipient.

When eligibility for TANF or SSI ceases, resources owned by former TANF/SSI recipients must be reevaluated since the resource(s) are no longer automatically excluded. This should be done by recoding as appropriate all resources coded "ZZ" or "XA" on LIRE or OTAP.
Tools - Tools in use. Tools consist of such items as hammers, saws, wrenches, planes, pliers, hoes, rakes, and similar articles necessary for the maintenance of house, garden, or yard.
Vehicles - See 5500 and subsections.