19.25.35.10 Client Funded Trusts

*** The Health Care Programs Manual (HCPM) has been replaced by the Minnesota Health Care Programs Eligibility Policy Manual (EPM) as of June 1, 2016. Please refer to the EPM for current health care program policy information. ***

Client-Funded Trusts

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.

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.

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 Whether the trustee has discretion or whether discretion granted to the trustee is actually exercised.

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.

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 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. A payment made to someone other than to the client, the client’s spouse or to someone else for the sole benefit of the client or the client’s spouse during the lookback period or while the client is receiving MA payment of LTC services is subject to a transfer penalty.

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.

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.

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.

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.

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.

Evaluate an irrevocable trust to determine if an uncompensated transfer was made when the trust was established during the lookback period, or while the client is receiving MA-LTC. An uncompensated transfer occurs when:

n A person places assets out of his or her control by placing them in an irrevocable trust.

n A payment is made to someone other than to the client, the client’s spouse or to someone else for the sole benefit of the client or the client’s spouse during the lookback period or while the client is receiving MA payment of LTC services is subject to a transfer penalty.

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.

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.

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.

Chapter 19 - Assets	Effective: July 1, 2010
19.25.35.10 - Client-Funded Trusts	Archived: June 1, 2016 (Previous Versions)