Effective: February 1, 2010
18.104.22.168 - Special Needs Trusts
A Special Needs Trust is a trust established for the benefit of a person under age 65 who is disabled. A trust that meets the requirements of a Special Needs Trust is excluded as an asset for a person whose MA basis of eligibility is due to blindness or disability.
Note: Some trusts titled as a ”Special Needs Trust” do not meet all of the requirements of a Special Needs Trust. It is important to review the trust instrument The formal document that creates a trust and contains the powers of the trustees and the rights of the beneficiaries. A trust instrument can be a will or a formal declaration of a trust. Sometimes referred to as the Trust Agreement. to determine whether it meets the requirements of a Special Needs Trust.
Special Needs Trust Requirements.
Evaluation of Special Needs Trusts.
Special Needs Trust Verifications.
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Special Needs Trust Requirements
A trust must satisfy all of the following criteria in order to evaluate it using Special Needs Trust policy.
If a trust that is funded by the client or the client’s spouse does not meet all the criteria, the trust is not a Special Needs Trust and is not excluded; evaluate that trust as a non-excluded Client-Funded Trust.
l Date Created.
Established on or after August 11, 1993.
l Beneficiary Age Limit for Establishing a Special Needs Trust.
Established before the beneficiary turns age 65.
A trust qualifying as a special needs trust established before the client turns age 65 remains excluded after the client turns age 65.
Note: Evaluate any addition to the trust by the client or the client’s spouse after the client reaches age 65 as a transfer. See Transfers.
l Established by.
Established by the client’s parent, grandparent, legal guardian, or a court.
l Funded by.
Funded with the income or assets of the client. The trust may also contain assets of other individuals.
l Disability Standard.
The client must meet the disability criteria of the SSI program at the time the trust is established. A person with a disability established by the Social Security Administration (SSA) or State Medical Review Team (SMRT) meets this qualification. See Disability Determinations.
The trust does not meet the criteria to be treated as a special needs trust if the client’s disability began after the trust was established.
Note: If the client’s disability was not determined by SSA or SMRT at the time the trust was established, the SMRT must determine whether the client was disabled according to SSI Supplemental Security Income. A program based on financial need operated by the Social Security Administration that provides monthly income to low income people who are age 65 or older, blind or disabled. disability criteria at the time the trust was established.
l Sole Benefit Requirement.
The client must be the lifetime beneficiary The person named to receive benefits or payments (for example, social security payments or payments from a life insurance policy or trust). For annuities, a beneficiary is the individual, trust, or entity named by the annuity owner to receive death benefits from an annuity. under the trust and the trust instrument must state that disbursements Any payment from a trust, including, but not limited to, cash and other liquid items, personal property, real property or the right to use and occupy real property. from the trust must be for the sole benefit of the client at the time the trust is established and any time in the future. Consider the trust as established for the sole benefit of a disabled client if the trust benefits no one but that individual, whether at the time the trust is established or any time in the future.
n Trusts that allow for payments to a spouse or dependents during the lifetime of the client do not meet this requirement even if the client does not currently have a spouse or dependent.
n Disbursements by the trustee The person or entity who manages a trust corpus. When two or more trustees manage trust funds at the same time, they are referred to as co-trustees. to anyone who is not the client whether in cash or in kind are not allowable unless one of the following exceptions applies.
Exceptions: Consider the following disbursements to be for the sole benefit of the client:
q Disbursements by the trustee for the benefit of the client.
q Income taxes owed on income from trust investments or on income of the trust beneficiary assigned to the trust when an actual tax liability is established when tax returns are filed.
q Trust investment fees related to administration of the trust.
q Reasonable and necessary professional expenses including trustee, accounting and attorney fees related to managing the funds or property in the trust.
q Guardianship and conservatorship fees for the trust beneficiary when based on the fair market value for the services provided.
l DHS Remainder Beneficiary - Distributions Upon the Beneficiary’s Death.
The trust must contain a provision stating that, upon the death of the individual, DHS (or "the State”) receives all amounts remaining in the trust, up to an amount equal to the total amount of Medical Assistance paid on behalf of the individual.
Allow payment of administrative expenses and fees if the trust contains a provision stating that the expenses and fees must be reasonable or if the trust clearly states reasonable and necessary administrative expenses may be paid only if DHS is provided with advance notice and approves such expenses.
Trusts that include provisions that allow for payment of the following expenses prior to repayment to the state do not qualify as a Special Needs Trust:
n Payment for last illness and funeral, outstanding debts or other payments.
n Payment of administrative expenses or attorney and trustee fees if the trust does not require such payment(s) to be reasonable.
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Evaluation of Special Needs Trust
l Exclude the assets held in the trust, including any income generated by the trust assets that is retained by the trust. Income generated by assets held in the trust and retained by the trust is not income to the trust beneficiary.
l Count disbursements from the trust made directly to the client or to someone acting on the client’s behalf, such as, a guardian or legal representative as unearned income in the month received. Do not count payments made by the trustee for the benefit of the client, but not made directly to the client.
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Special Needs Trust Verifications
Request the following verifications when a trust meets all the requirements of a Special Needs Trust:
n Request a copy of the trust instrument and most recent trust accounting.
n Complete the Special Needs/Pooled Trust Referral Form (DHS-4759).
n Send the completed DHS-4759 to the DHS Special Recovery Unit (SRU) with a copy of the trust instrument and the most recent trust accounting.
SRU - Trusts,
Minnesota Department of Human Services,
P.O. Box 64995,
St. Paul, MN 55164-0995,
(651) 431-3100 (select option 3-3).
Fax: (651) 431-7431.
l Annual Reporting by Trustees.
The trustee of a Special Needs Trust with a beneficiary who is an applicant or recipient for MA is required by state law to submit an annual trust accounting directly to the DHS Special Recovery Unit. Do not require the client to provide this information as part of the renewal process.
If the client or the client’s authorized representative or trustee provides this information to the county, forward the information to the DHS Special Recovery Unit (SRU).
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