|
Effective: November 1, 2008 |
|
|
19.25.35ar2 - Trusts (Archive) |
Archived: February 1, 2010 |
This section provides policy provisions for trusts.
A trust is a legal arrangement in which a person (trustor) transfers money or property into the trust with the intention that the money or property be held, managed or administered by another person (trustee) for the benefit of a third person or persons (beneficiaries).
A trust must be reviewed to determine if it is available as an asset and if it is potentially an income source for the client. The client may be the creator of the trust and/or the person who receives the benefit from the trust.
A trust can be a complicated legal document. If additional help is needed determining the provisions of the trust, contact the county attorney or follow your agency's HealthQuest procedures.
The following definitions will be used frequently throughout this manual section. They can also be found in the manual’s glossary.
The trust agreement is the legal document establishing the trust which holds or owns specific property, reflects the intent of the trustor, and created for a lawful purpose.
Trust Principal or Trust Corpus:
The trust principal, otherwise known as the trust corpus, is the income and/or assets that are used by the trustor to fund the trust.
The trustor or Settlor, also known as the creator, donor or grantor, is the person who created the trust.
The trustee is the person or entity (bank or insurance company) that holds legal title to the funds or property for specified purposes on behalf of the beneficiary.
l The trustee has the responsibility to manage the trust's resources and income for the benefit of the beneficiaries according to the terms of the trust and requirements of state and federal law.
The beneficiary is the person designated in the trust as benefiting in some way from the trust. The beneficiary can be the grantor, another person or persons, or a combination.
Trust income is the amount earned by the investment of the trust principal or legally assigned to the trust.
The exculpatory clause is a provision in a trust that provides for the suspension, termination, limitation or diversion of the principal, income or beneficial interest of a beneficiary if the beneficiary applies for, is determined eligible for or receives public assistance.
Other exculpatory clauses relieve a trustee from liability for mistakes or errors.
Undisbursed income is income that could be paid out to the beneficiary, but remains in the trust.
A revocable trust allows the trustor to dissolve or amend the trust.
An irrevocable trust does not allow the trustor to retain the right to dissolve the trust.
Determine whether the corpus of the trust is available or unavailable to the client. Several factors affect trust availability, including but not limited to:
l The type of trust.
n The corpus of Special Needs Trusts and Supplemental Needs Trusts are considered unavailable. These trusts have special provisions which govern their availability.
n A testamentary trust is not considered available to the beneficiary until the death of the trustor and the release of the trust by the state.
n Support trusts are usually considered available, even if irrevocable.
l When the trust was established.
n To determine when the trust was established, use the original legal document establishing the trust. Do not use dates of provision changes, or funding, or additional sources of funding.
n Trusts established on or after August 11, 1993 are treated differently than trusts established before that date. See Trusts Established On Or After August 11, 1993 and Trusts Established Before August 11, 1993.
n Irrevocable trusts established on or after July 1, 2005 are considered available to a client in certain circumstances. See Trusts Established On or After August 11, 1993 for more details on this provision.
l If the trust is revocable or irrevocable.
n Irrevocable trusts must be assessed for availability based on the terms of the trust.
n The trust corpus and undisbursed income of a revocable trust are available.
l Whose resources were used to fund the trust.
l If the trustees have, or can exercise, discretion under the trust.
l For whom the trust was created.
n If the trust is created for the benefit of a disabled person the disability must be determined using SSA criteria prior to the creation of the trust. See Supplemental Needs Trusts and Special Needs Trusts.
n If the client’s income and assets were used in establishing the trust it may be necessary to determine if an improper transfer has taken place.
l If the trust contains an exculpatory clause.
n Such provisions in most trusts created in Minnesota on or after July 1, 1992, are unenforceable including those trusts set up in a will with the client as a beneficiary.
n This includes trusts set up in a will with the client as beneficiary.
n Supplemental Needs Trusts are exempt from these restrictions.
Example:
Mr. Williams executed his will on January 2, 1992. The provisions of the will put his estate into trust for his wife, with the provision that the trust benefits be diverted to their son if his wife becomes eligible for public assistance. Mr. Williams died on March 5, 1993. His wife entered a nursing home on September 5, 1997 at age 70.
Action:
Because the trust was created by a will executed before July 1, 1992, the provision diverting benefits to the son is probably enforceable.
Example:
Mr. Stevens placed most of his assets in a trust, naming himself as beneficiary, on June 5, 1999. The trust instrument contains a provision that the funds will become unavailable to Mr. Stevens, unless approved by a trustee, if he becomes eligible for public assistance. Mr. Stevens applies for health care today. He has been in an LTCF since 2000. He would be asset eligible for MA if the trust was not counted toward his asset total. The trustee states that no funds will be made available for Mr. Stevens’ medical care.
Action:
The provision makes Mr. Stevens’ trust funds unavailable because the trustee will not release them is not enforceable. The trust corpus is considered available and is counted toward his asset total.
l Specific provisions of a court order or other document establishing the trust.
If necessary, contact the county attorney or follow your agency's HealthQuest procedures for a determination concerning whether the corpus of the trust can be excluded or is considered as an available or unavailable asset.
Count available, non-excluded trust assets in the asset total.
Note: Do not count unavailable trust assets in the asset total.
Exclude trust corpus for beneficiaries under age 21.
If the trust corpus is an excluded asset, any interest or gain from investing the trust principal is also an excluded asset.
Payments made from the trust to the beneficiary may be counted as unearned income regardless of whether the trust corpus is considered available.
Payments made from the trust to others for the benefit of the client who is the beneficiary are not counted as income for the client.
If necessary, contact the county attorney or follow your agency's HealthQuest procedures for a determination regarding whether or not income is available.
If additional funding sources to a Special Needs Trust are reported after the trust has been established, require verification of the source and amount of the additional funding source.
Specific program requirements can be found below:
l MinnesotaCare, GAMC and GHO:
Trusts are not verified for MinnesotaCare, GAMC or GHO. However, the worker should assist the client in determining the value of the trust.
l MA Method A and RMA:
Follow Verification of Assets for MA Method A.
l MA Method B:
Verification of trusts is required regardless of whether the trust is counted, excluded or unavailable. See Verification of Assets.
l LTCF or Elderly Waiver (EW):
Clients with a community spouse must verify trusts included in an asset assessment, application, and the first annual renewal. See Asset Assessments.
Clients without a community spouse must verify trusts following MA Method B policy.
A transfer of income and assets by the client into an irrevocable trust must be evaluated for a possible improper transfer.
l The value of this type of transfer is the amount that can never under any circumstances be returned to the person who established the trust.
l The date of the transfer is the date the income or assets are placed in the trust.
Note: Certain irrevocable trusts established on or after July 1, 2005 may be available and are not considered an improper transfer. See Trusts Established On or After 8-11-93 for more details on this provision.
l If any part of the principal can be returned to the person who established the trust under any circumstances, consider the amount that could be returned as an available asset to the person.
l The establishment of or additions to a pooled trust, and additions to a special needs trust, by or on behalf of a person age 65 or older, must be evaluated for a possible improper transfer.
If necessary, contact the county attorney or follow your agency's HealthQuest procedures for a determination regarding whether the principal in an irrevocable trust can be returned to the client who established the trust.
See Transfers for more specific policy information.