Supplemental Needs Trusts

A ”supplemental needs trust” is a trust established and funded by a third party to provide for the supplemental needs of a person living with a disability while allowing such a person to remain eligible for Minnesota Health Care Programs (MHCP).

Supplemental Needs Trust Requirements.

Evaluation of Assets Held in the Trust.

Treatment of Payments Made from a Trust to the Client.

Supplemental Needs Trust Verifications.

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Supplemental Needs Trust Requirements

A Supplemental Needs Trusts must meet the following requirements:

Note:  If the trust does not meet all of the Supplemental Needs Trust requirements, evaluate the trust as a Third Party Established and Funded Trust.  

l  Purpose

To provide for the reasonable living expenses and other basic needs of a person with a disability when benefits from publicly funded benefit programs are not sufficient to provide adequately for those needs.

Note: The trust may allow distributions to cover all or part of the beneficiary’s reasonable living expenses.

l  Beneficiary

For Supplemental Needs Trusts established on or after July 1, 1993, the beneficiary must have been a person with a disability before the trust was created. The trust does not meet the criteria as a supplemental needs trust for MHCP eligibility purposes if the client’s disability was established after the trust was established.  

The disability must be based on Social Security Administration (SSA) criteria. See Disability Determinations. Verification of disability meeting SSA criteria can be established through:

n  Receipt of 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. or RSDI Retirement, Survivors, and Disability Insurance. A program operated by the Social Security Administration that provides a monthly income to retired people, survivors or dependents of insured people, and people with disabilities. benefits.

n  A State Medical Review Team (SMRT) determination of disability.

Note:  If the client was not receiving SSI or RSDI payments for the disabled (certified disabled by SSA) at the time the trust was established, SMRT must determine whether the client was disabled at the time the trust was established.  

n  A licensed professional qualified to diagnose the disabling illness or condition.

m The licensed professional must determine that the person has a physical or mental illness that substantially impairs the person’s ability to care for him or herself.

m The condition must be expected to last for a continuous period of 12 months or more.

m A second licensed professional of the same qualification must confirm the diagnosis in writing.

l  Established by

Someone other than the disabled person or the disabled person’s spouse.

l  Established and Funded by

Someone other than the disabled person or the disabled person’s spouse or anyone obligated to pay any sum for damages or any other purpose to or for the benefit of the client under the terms of a court settlement agreement or judgment.  

Exception:  A supplemental needs trust may be established with lump sum proceeds of payments made by the Social Security Administration pursuant to the United States Supreme Court decision in Sullivan v. Zebley, 493 U.S. 521,110 S.Ct. 885 (1990) (Zebley Trusts).

A supplemental needs trust can be funded during the life of the third party grantor. A supplemental needs trust can also be funded at the death of a third party grantor’s estate or at death through beneficiary designations on an annuity, multiparty accounts, or other accounts or investments.  

l  Trustee

The beneficiary cannot be the trustee. The trustee can be the beneficiary’s parents, siblings, other family members or friends, a professional trustee, or a trust officer from a financial institution.

l  Exclusion Limitation Based Upon Age and Living Arrangement

Supplemental Needs Trusts are not enforceable for beneficiaries age 65 or older who reside in a state institution or nursing facility for six months or more and, due to the client’s medical need for care in an institutional setting, there is no reasonable expectation the beneficiary will ever be discharged from the institution or facility.   

Note:  This limitation does not apply to supplemental needs trusts established before July 1, 1993.

l  Distributions During Beneficiary's Lifetime

The trustee must first rely on public benefits before making distributions from the trust. The trust must prohibit disbursements to replace or reduce public assistance benefits otherwise available. Beyond that limitation, the trustee has discretion to determine the timing and amount of distributions.

l  Distributions at Beneficiary’s Death

A supplemental needs trust may provide for beneficiaries (contingent or residual) at the death of the disabled person.  

Note:  A supplemental needs trust is not required to include a provision to reimburse DHS for all Medical Assistance benefits paid on behalf of the beneficiary at the beneficiary’s death.

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Evaluation of Assets Held in the Trust

Treat the trust corpus as unavailable to the client if the trust meets all of the Supplemental Needs Trust Requirements above.  

Exception:  Count the trust corpus of a supplemental needs trust established on or after July 1, 1993, as an available asset when the client meets all of the following conditions:

n  Is over 64 years old; and

n  Has been a patient or resident in a state institution or nursing facility for six months or more; and

Note:  Do not consider a group residential housing (GRH) facility to be a state institution or nursing facility for this purpose.

n  Has no reasonable expectation of discharge from the institution or nursing facility because of a medical need for institutional care.  

l  Verification.

Accept a physician’s statement of whether the client has a reasonable expectation of discharge.

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Treatment of Payments Made from a Trust to the Client

Count disbursements made directly to the beneficiary as unearned income when the corpus of a supplemental needs trust is excluded.

Do not count disbursements to the beneficiary as unearned income when the supplemental needs trust is not enforceable. Count the trust as an available asset when a supplemental needs trust is not enforceable. See Limited Exclusion Based Upon Age and Living Arrangement.

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Verification of Supplemental Needs Trusts

Follow policy for verification of assets.

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