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Effective: May 1, 2010 |
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19.25.35.10ar3 - Client-Funded Trusts (Archive) |
Archived: July 1, 2010 |
Client-funded trusts are trusts funded with the income or assets of the client and/or the client’s spouse. The client and/or the client’s spouse (grantor(s)) fund the trust by transferring liquid or non-liquid property (the trust corpus ) to the trustee (s) of a trust for the benefit of the grantee(s) or others.
Evaluate a client-funded trust for clients with an asset limit to determine whether the trust can contribute toward the client’s health care needs. The corpus of a client-funded trust that meets certain requirements is excluded as an asset for a person who has an MA basis of eligibility due to blindness or disability. See Special Needs Trusts and Pooled Trusts for more information.
Additional evaluation of a client-funded trust may be required when a client requests Medical Assistance payment of long-term care (MA-LTC) services. Evaluate whether liquid assets, non-liquid assets, or both that the client, client’s spouse, or both, transferred into the trust results in an uncompensated transfer. See Transfers for more information.
Evaluation of Client-Funded Trusts.
Revocable Client-Funded Trusts.
Irrevocable Client-Funded Trusts for Persons Not Requesting MA-LTC.
Irrevocable Client-Funded Trusts for Persons Requesting MA-LTC.
Client-Funded Trust Verifications.
A client-funded trust must meet all of the following criteria:
1. Not be established under a will.
2. Established by one or more of the following:
n The client during the client’s lifetime (inter vivos trust also referred to as a living trust);
n The client’s spouse during the spouse’s and the client’s lifetime (inter vivos trust);
n The client’s representative, including a court or administrative body with legal authority to act in place of or on behalf of the client or client’s spouse. This includes proceeds from litigation when the court uses the proceeds to fund a trust; or
n A person, court or administrative body acting at the direction of, or on request of, the client or the client’s spouse.
Note: In the case of a Special Needs Trust, a parent, grandparent, legal guardian or court must establish the trust.
3. Funded with the assets or income of the client or the client’s spouse.
Evaluate client-funded trusts that do not qualify for exclusion as a Special Needs Trust or Pooled Trust without regard to any of the following stipulations that may be contained in the trust instrument:
n Purpose, whether limited or unlimited, for which the trust was established.
n Whether the trustee has discretion or whether discretion granted to the trustee is actually exercised.
n Restrictions on when or whether distributions may be made.
n Restrictions on the use of distributions from the trust.
Evaluation of Client-Funded Trusts
Evaluate client-funded trusts established before August 11, 1993, as Medicaid Qualifying Trusts (MQTs).
Evaluate Client-Funded Trusts established on or after August 11, 1993, as follows:
1. Trusts funded by a disabled person on or after August 11, 1993, may qualify for exclusion as a Special Needs Trust or Pooled Trust. Follow the instructions for Special Needs Trusts or Pooled Trusts for specific instructions for evaluating these trusts.
2. Evaluate client-funded trusts established after August 11, 1993, that do not qualify as a Special Needs Trust or Pooled Trust to determine if the trust is considered available to the client based upon the terms of the trust instrument.
Exception: Treat assets held within a Zebley Trust as unavailable to the client. Do not count income disbursed to the client from a Zebley Trust as available.
Revocable Client-Funded Trusts
n Count the trust corpus as available to the client.
Exception: Exclude assets in the corpus of a client-funded, revocable trust that would be excluded for MHCP eligibility purposes if not held within the revocable trust. See Excluded Assets. For example, if the client’s vehicle is part of the client-funded, revocable trust, the vehicle is excluded if it qualifies for exclusion. See Vehicles.
n Count income earned on the trust corpus as unearned income to the client.
n Count earned and unearned income of the client that is deposited into the trust as income to the client in the month received.
n Evaluate payments made from the trust to someone other than the client or on behalf of the client as a transfer. See Transfers.
Irrevocable, Client-Funded Trust for Persons Not Requesting MA-LTC
When a trust is irrevocable, it means the trust instrument cannot be revoked (cancelled). However, the provisions of an irrevocable trust instrument may allow disbursements to be made to or on behalf of the client under certain circumstances.
Evaluate an irrevocable trust for clients with an asset limit to determine if any portion of the trust can be made available to the client.
n Count the following toward the client’s asset limit:
The entire amount of the trust corpus (including income earned by the trust corpus that remains in the trust) that the trustee can make available to the client under the terms of the trust instrument.
Note: Trust provisions that limit trust benefits available to the beneficiary or divert trust assets or income to someone else if the beneficiary applies for or becomes eligible for MA are invalid provisions and unenforceable in non-excluded client-funded trusts created in Minnesota on or after July 1, 1992. When such a trust provision is found, treat the provision as ”created” on the date of execution of the first trust instrument that contains the provision, even if the trust was later amended or reformed or the trust was not funded until a later date.
Request a county attorney opinion for questions regarding the availability of the trust corpus. Submit a HealthQuest for a determination regarding the availability of the trust if a county attorney opinion is not available.
n 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 to a third party for the benefit of the client.
Irrevocable, Client-Funded Trust for Persons Requesting MA-LTC
Non-excluded, client-funded irrevocable trusts created on or after July 1, 2005, are revocable by operation of state law for trust beneficiaries requesting or receiving MA payment of LTC services. For purposes of evaluating an irrevocable trust for a person requesting MA-LTC, the trust is created on the date it is fully executed by or on behalf of all of the grantors or others.
To evaluate irrevocable trusts for persons requesting MA-LTC:
n Trust created on or after July 1, 2005: Follow the instructions in the Evaluation of Revocable Client-Funded Trusts.
n Trusts created before July 1, 2005:
m Count the entire amount of the trust corpus (including income earned by the trust corpus that remains in the trust) that the trustee can make available to the client under the terms of the trust instrument toward the client’s asset limit.
Note: Trust provisions that limit trust benefits available to the beneficiary or divert trust assets or income to someone else if the beneficiary applies for or becomes eligible for MA are invalid provisions and unenforceable in non-excluded client-funded trusts created in Minnesota on or after July 1, 1992. When such a trust provision is found, treat the provision as ”created” on the date of execution of the first instrument that contains the provision, even if the trust was later amended or reformed or the trust was not funded until a later date.
Request a county attorney opinion for questions regarding the availability of the trust corpus. Submit a HealthQuest for a determination regarding the availability of the trust corpus if a county attorney opinion is not available.
m 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 to a third party for the benefit of the client.
Follow the instructions in Evaluation of Irrevocable Client-Funded Trusts for Persons Not Requesting MA-LTC if the person is determined ineligible for MA-LTC.
Client-Funded Trust Verifications
See the sections on Special Needs Trusts or Pooled Trusts for verification and reporting requirements for those types of client-funded trusts.
For all other client-funded trusts: at application, request a copy of the trust instrument and documentation of the trust corpus.
The value of a trust or the part of a trust that is considered a countable asset may be waived due to undue hardship to the client if the countable value of the trust cannot actually be made available to the client and if counting the value of the asset results in the client exceeding the applicable asset limit.
Undue hardship means that either:
l A client may be forced to go without life sustaining services because the trust corpus could not be made available to pay for the needed services.
l Applying trust policy would deprive the client of medical care and endanger his or her health or life.
Add worker comments to the notice of the client’s right to request an undue hardship waiver when the client is ineligible for health care coverage due to excess assets held in a trust.
If the waiver is:
l Granted, send the client a notice stating that the waiver is granted as of a specified date.
l Denied, send the client a notice containing the client’s right to appeal the decision.