Medical Assistance for People Who Are Age 65 or Older and People Who Are Blind or Have a Disability

2.3.3.2.7.9.4 Special Needs Trusts

A special needs trust is a trust established for the sole benefit of a person under age 65 who is certified disabled. The principal or corpus of a trust that meets all the requirements of a special needs trust is excluded.

Trust Requirements

A trust must satisfy all of the following legal requirements in order to be excluded as a special needs trust.

Date Established

It is established on or after August 11, 1993.

Beneficiary Age Limit for Establishing a Special Needs Trust

It is established before the beneficiary reaches age 65. A special needs trust established before the beneficiary reaches age 65 remains excluded after the beneficiary reaches age 65.

Established By

A special needs trust established before December 13, 2016, must be established through the actions of the beneficiary's parents, grandparents, legal guardian, or a court.

A special needs trusts established on or after December 13, 2016, may also be established by the actions of the beneficiary on their own behalf. A special needs trust established before December 13, 2016, cannot be established by the beneficiary.

Funded By

It is funded with the income or assets of the beneficiary. A special needs trust may also contain assets of other people.

Disability Standard

The beneficiary must meet the disability criteria of the Supplemental Security Income (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.

The trust does not meet the criteria for the exclusion if the beneficiary’s disability began after the trust was established.

If SSA or SMRT did not determine the beneficiary’s disability at the time the trust was established, SMRT must determine whether the beneficiary was disabled according to SSI disability criteria at the time the trust was established.

Sole Benefit Requirement

The trust must be established for and used for the sole benefit of the disabled beneficiary and must provide that all disbursements are for the sole benefit of the beneficiary, with the following exceptions:

The trust may allow reasonable compensation for a trustee or trustees to manage the trust.
The trust may also allow reasonable costs associated with investment, legal, or other services rendered on behalf of the beneficiary with regard to the trust.

A trust is not excluded as a special needs trust if it includes a provision that allows for either of the following:

Benefits to other people or entities during the beneficiary's lifetime, or
Termination of the trust prior to the beneficiary's death with payment of the corpus to another person or entity, other than repaying the State

DHS Remainder Beneficiary

The trust must provide that, upon the death of the beneficiary or earlier termination of the trust, the Minnesota Department of Human Services (DHS), or "the State” receives all amounts remaining in the trust, up to an amount equal to the total amount of Medical Assistance (MA) paid on behalf of the beneficiary.

Allowable Administrative Expenses

The trust may pay the following types of administrative expenses from the trust before the repayment of DHS as the remainder beneficiary:

Taxes due from the trust to the State, other states, or federal government because of the death of the beneficiary
Reasonable expenses for the administration of the trust estate, such as an accounting of the trust to a court, completion and filing of documents, or other required actions associated with termination and wrapping up of the trust.

For these administrative expenses, the trust must provide that:
- The DHS Special Recovery Unit (SRU) must receive advance notice and must approve any payment of administrative expenses before such expenses are paid, and
- The administrative expenses must be reasonable

Prohibited Expenses and Payments

A trust that provides for payment of any of the following expenses prior to repayment of DHS is not excluded as a special needs trust:

Taxes due from the estate of the beneficiary other than those arising from inclusion of the trust in the estate;
Inheritance taxes due for residual beneficiaries;
Payment of debts owed to third parties;
Funeral expenses; or
Payments to residual beneficiaries.

Evaluation of Trust Principal and Additions to the Trust

Trust Principal

The trust principal, including any income generated by the trust that is retained by the trust, is considered excluded as long as the trust is established and any additions occur before the beneficiary reaches age 65.

Additions to the Trust Before Age 65

Additions to the trust principal made directly to the trust before the beneficiary reaches age 65 are excluded.

Income not irrevocably assigned to the trust is not considered to be made directly to the trust and therefore is counted as income to the beneficiary. A court order irrevocably assigning income to the trust is required to show an irrevocable assignment. If an assignment is revocable, the payment is income to the beneficiary because the beneficiary is legally entitled and eligible to receive it, unless another income exclusion applies. Note that certain payments to a beneficiary are not assignable by law. Send a HealthQuest if you have questions about assignability of income to a trust.

Additions to the Trust At or After Age 65

Additions to the trust after the beneficiary reaches age 65 are not excluded. The value of any non-excluded assets added to the trust after the beneficiary reaches age 65 is considered available to the beneficiary.

However, if the beneficiary’s right to receive payments from an annuity, support payments, or Survivor Benefit Plan (SBP) payments was irrevocably assigned to the trust before the beneficiary reached age 65, the payments are excluded and do not disqualify the trust as a special needs trust.

Interest, dividends, or other earnings of the trust after the beneficiary reaches age 65 remain excluded.

Evaluations of the Trust Disbursements

Disbursements of cash from the trust made directly to the beneficiary or to a person acting on the beneficiary's behalf are counted as unearned income in the month received.

Disbursements to a third party that result in the beneficiary receiving non-cash items, are not counted. Disbursements that do not count as income may include, but are not limited to those made for educational expenses, therapy, transportation, professional fees, medical services not covered by Medicaid, phone bills, recreation, and entertainment.

Disbursements must be for the sole benefit of the beneficiary.

Consider disbursements to be for the sole benefit of the beneficiary if the trustee makes payments of any sort from the principal or income of the trust to another person or entity such that the beneficiary derives the primary benefit from the payment.

Purchased goods that require registration or titling, such as a vehicle or real property, must generally be registered or titled in the name of the beneficiary, the trustee, or the trust.

Special Needs Trust Verifications

Verification of a Special Needs Trust is required. A copy of the trust instrument and most recent trust accounting along with a completed Special Needs/Pooled Trust Referral Form (DHS-4759) must be sent to the DHS Special Recovery Unit (SRU).

Annual Reporting by Trustees

The trustee of a Special Needs Trust with a beneficiary who is an MA applicant or enrollee is required by state law to submit an annual trust accounting directly to the SRU. The person is not required to provide this information as part of the renewal process.

If the person or the person’s authorized representative or trustee provides this information to the county, the information must be forwarded to the SRU.

Legal Citations

Minnesota Statutes, section 256B.056, subdivision 1a

Minnesota Statutes, section 256B.056, subdivision 3b

Minnesota Statutes, section 501C.1205, subdivisions 3 and 4

United States Code, title 42, section 1396p(d)