Valuation of Assets 510-05-70-60

(Revised 10/1/14 ML #3420)

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(N.D.A.C. Section 75-02-02.1-32)

 

It is not always possible to determine the value of assets with absolute certainty, but it is necessary to determine a value in order to determine eligibility. The valuation must be based on reasonably reliable information. It is the responsibility of the applicant or recipient, or the persons acting on behalf of the applicant or recipient, to furnish reasonably reliable information. However, because an applicant or recipient may not be knowledgeable of asset values, and particularly because that person may have a strong interest in the establishment of a particular value, whether or not that value is accurate, some verification of value must be obtained. If a valuation from a source offered by an applicant or recipient is greatly different from generally available or published sources, the applicant or recipient must provide a convincing explanation for the differences particularly if the applicant or recipient may be able to influence the person providing the valuation. If reasonably reliable information concerning the value of assets is not made available, eligibility may not be determined. Useful sources of verification include, but are not limited to:

  1. With respect to liquid assets: account records maintained by banking facilities.
  1. When establishing eligibility, the value of liquid assets is determined using the account records provided. If the verification includes more than one balance for the month for which eligibility is being determined, the lowest balance is used. If the applicant or recipient has excess assets, subtract any monthly income that was deposited into the account. Income subtracted from the account, however, cannot be deducted from a balance prior to the date the income was deposited.

For example: The low balance in an account is on May 2. The monthly income is deposited on May 7. The next low balance is on May 30. The monthly income cannot be subtracted from the May 2 low balance, but it can be subtracted from the May 30 balance.

  1. If an applicant or recipient provides verification of checks that were recently written, but that have not cleared the account by the end of the month, those expenditures can be used to further reduce the value of the account.
  1. With respect to personal property other than liquid assets:
  1. Publicly traded stocks, bonds and securities: stock brokers.
  2. Autos, trucks, mobile homes, boats, or any other property listed in published valuation guides accepted in the trade: the valuation guide. Use the "average trade-in" value for the vehicle without using any add-ons or deductions. The applicant or recipient may also provide verification of the true value from a reliable source if the vehicle is no longer listed in the valuation guide or if the applicant or recipient has reason to believe that the estimate is inaccurate.
  3. With respect to harvested grains or produce: grain buyers, grain elevator operators, produce buyers; and, for crops grown on contract: the contract.
  4. With respect to stock in corporations not publicly traded: appraisers, accountants.
  5. With respect to contractual rights to receive money payments: If payments are current, the contract, and if payments are not current, see 05-70-40.  
  6. With respect to other personal property: dealers and buyers of that property.
  7. With respect to life insurance policies, the insurance company.
  1. Real property:
  1. With respect to mineral interests:
  1. If determining current value (for sale or pending transfer):

(1) Fair market value is the value established by good faith effort to sell. The best offer received establishes the value.

(2) A good faith effort to sell means offering the mineral interests to at least three companies purchasing mineral rights in the area, or by offering for bids through public advertisement.

  1. If determining a previous value for mineral rights sold or transferred in the past, fair market value is:

(1) If producing, the value is an amount equal to any lease income received after the transfer plus three times the annual royalty income.

(a) Based on actual royalty income from the 60 months following the transfer; or

(b) If 60 months have not yet passed, based on actual royalty income for the months that have already passed, and an estimate for the remainder of the 60 month period.

(2) If not producing, but mineral rights are leased, two times the lease amount (based on the actual lease and not the yearly lease amount) that was in place at the time of the transfer.

 

Example: John Oilslick leased his mineral acres in 2008 for $3000. He transferred his mineral rights to his adult children in January 2010. The children have a new lease on these acres effective January 2011 for $10,000. The disqualifying transfer is equal to two times the $3,000 lease that was in place at the time of the transfer.

 

(3) If not leased, the greater of two times the estimated lease amount, or the potential sale value of the mineral rights, as determined by a geologist, mineral broker, or mineral appraiser at the time of the transfer, whichever is greater.

 

Example: Don Goldmine had his mineral acres valued at $50,000 in 2010 when he transferred them to his children. Today those minerals are valued at $20,000. The amount of the disqualifying transfer would be $50,000, the value at the time of the transfer.

 

  1. In determining current or previous value, an applicant or recipient may provide persuasive evidence that the value established using the above process is not accurate. Likewise, if an established value is questionable, the Department may require additional evidence be provided to establish estimated fair market value.

 

Example: Mary Golddigger leased her mineral acres in June 2008 for $5,000 under a 3-year lease. Two months before the lease expired -- April 2011, she transferred those acres to her daughter, Nugget Golddigger. Nugget then leased those acres for $20,000. In this situation, at the time of transfer, Mary probably reasonably would be aware of the lease renewal amounts. Even if she didn't know, it is likely that the value was closer to the $20,000 than $5,000. The eligibility worker must get information of the estimated value as of the date of the transfer. The value of the disqualifying transfer at 2 X the newer lease amount of $20,000 equals $40,000.

 

  1. With respect to agricultural lands: appraisers, real estate agents dealing in the area, loan officers in local agricultural lending institutions, and other persons known to be knowledgeable of land sales in the area in which the lands are located, but not the "true and full" value from tax records.
  2. With respect to real property other than mineral interests and agricultural lands: market value or "true and full" value from tax records, whichever represents a reasonable approximation of market value; real estate agents dealing in the area; and loan officers in local lending institutions. If a valuation from a source offered by the applicant or recipient is greatly different from the true and full value established by tax records, an explanation for the difference must be made, particularly if the applicant or recipient may be able to influence the person furnishing the valuation.
  1. Divided or partial interests. Divided or partial interests include assets held by the applicant or recipients, jointly or in common with persons who are not in the Medicaid unit; assets where the applicant or recipient or other persons within the Medicaid unit own only a partial share of what is usually regarded as the entire asset; and interests where the applicant or recipient owns only a life estate or remainder interest in the asset.
  1. Liquid assets. The value of a partial or shared interest in a liquid asset is equal to the total value of that asset.
  2. Personal property other than liquid assets and real property other than life estates and remainder interests. The value of a partial or shared interest is a proportionate share of the total value of the asset equal to the proportionate share of the asset owned by the applicant or recipient.
  3. Life estates and remainder interests.
  1. The life estate and remainder interest table must be used to determine the value of a life estate or remainder interest. In order to use the table, it is necessary to first know the age of the life tenant or, if there is more than one life tenant, the age of the youngest life tenant; and the market value of the property which is subject to the life estate or remainder interest. The value of a life estate is found by selecting the appropriate age in the table and multiplying the corresponding life estate decimal fraction times the market value of the property. The value of a remainder interest is found by selecting the appropriate age of the life tenant in the table and multiplying the corresponding remainder interest decimal fraction times the fair market value of the property. Refer to 05-100-80 for the Life Estate table.
  2. The life estate and remainder interest tables are based on the anticipated lifetimes of individuals of a given age according to statistical tables of probability.  If the life tenant suffers from a condition likely to cause death at an unusually early age, the value of the life estate decreases and the value of the remainder interest increases.  An individual who requires long-term care, who suffers from a condition that is anticipated to require long-term care within twelve months, or who has been diagnosed with a disease or condition likely to reduce the individual's life expectancy is presumed to suffer from a condition likely to cause death at an unusually early age, and may not rely upon statistical tables of probability applicable to the general population to establish the value of a life estate or remainder interest.  If an individual is presumed to suffer from a condition likely to cause death at an unusually early age, an applicant or recipient whose eligibility depends upon establishing the value of a life estate or remainder interest must provide a reliable medical statement that estimates the remaining duration of life in years.  The estimated remaining duration of life may be used, in conjunction with a life expectancy table, to determine the comparable age for application of the life estate and remainder interest table.  Refer to 05-100-75 for the life expectancy table.
  3. In most situations, the act of establishing a life estate interest in property is transferring a partial interest, a remainder interest, in property to someone else, while retaining (or giving another) the life estate interest. When transferring a remainder interest, part of the value of the property is also transferred. The value transferred is established by multiplying the value of the property at the time of transfer by the appropriate value in the remainder interest column of the life estate and remainder interest table. Equity in the property must also be considered when determining the amount of the transfer. If there is a loan against the property that is assumed by the remaindermen as part of the transfer, then the amount of the loan is considered compensation received. If the life tenant retains the loan obligation, the full value of the remainder interest is the amount transferred.

Example:  A 75-year-old individual transfers a remainder interest in property, valued at $80,000, to his children and keeps a life estate interest. Using the table, the value of the remainder interest is $38,280.80 ($80,000 x .47851 = $38,280.80).  That is the amount he gave to his children and is the amount of the disqualifying transfer.  He still owns the life estate interest, which has a value of $41,719.20.

 

Equity in the property must also be considered when determining the amount of the transfer. If there is a loan against the property that is assumed by the remaindermen as part of the transfer, then the amount of the loan is considered compensation received. If the life tenant retains the loan obligation, the full value of the remainder interest is the amount transferred.

 

Example: A 75-year-old transfers a remainder interest in property, valued at $80,000, to his children and keeps a life estate interest. He has a $20,000 mortgage on the property, which he is still obligated to pay. Using the table, the value of the remainder interest is $38,280.80 ($80,000 x .47851 = $38,280.80) and is the value of what he transferred away. He still owns the life estate interest, which has a value of $41,719.20, but he only has $21,719.20 in equity ($41,719.20 - $20,000 loan). If the children who received the remainder interest also assumed the mortgage, the children actually are giving compensation, so the uncompensated amount of the transfer is only $18,280.80 ($38,280.80- $20,000 loan = $18,280.80).