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Effective: December 1, 2006 |
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19.25.35.20ar1 - Special Needs Trust (Archive) |
Archived: May 1, 2007 |
A special needs trust is a supplemental needs trust but it is more restrictive. However, some supplemental needs trusts may not meet the criteria for a special needs trust. Base the determination on whose income and/or assets were used to set up the trust. A special needs trust must be set up with the client’s own funds. It may also contain the assets of others if the trust is for the sole benefit of the disabled person.
Determining the Special Needs Trust Value.
Special Needs Trust Requirements.
Criteria that Negates a Trust from being a Special Needs Trust.
Determining the Special Needs Trust Value
Exclude the value of a trust corpus from a client’s asset total, if the trust meets all of the Special Needs Trust requirements.
If you determine a trust meets the requirements of a special needs trust, and it is excluded from a client’s asset total, complete the Special Needs/Pooled Trust Information Form (DHS-4759). Send the completed form to the DHS Special Recovery Unit.
Note: If the client dies before DHS receives the form, please note the date the client died on the form.
When an enrollee who is the beneficiary of a special needs or pooled trust dies, DHS will contact the trustee of the trust to arrange for the recovery of the enrollee’s MA.
Special Needs Trust Requirements
To be considered a Special Needs Trust a trust must meet all of the following requirements:
l Established on or after August 11, 1993.
l Contains only the income and/or assets of the disabled client.
n If the trust contains the income or assets of the client and others, including the client's spouse, it must be used for the sole benefit of the disabled person.
n Require the trustee to verify whether the trust allows for funding by other persons or allows the trustee the power to receive additions to the trust from any other source. The trustee must verify the source and amount of all additions to the trust at the time of the six-month or annual review.
l The trust must specify that upon termination of the trust, DHS will receive all amounts remaining in the trust up to an amount equal to the total medical expenses paid through MA on the client's behalf.
n If the trust is revocable, it must contain a clause that certifies DHS is the primary recipient of the funds remaining in the trust upon the death of the client.
n If the trust is revoked prior to the death of the client, the trust is no longer an excluded asset. Review assets to determine client’s eligibility.
n If the trust is irrevocable, it must contain a clause that certifies DHS is the primary beneficiary upon the death of the client.
l The trust must state that distributions from the trust are for the sole benefit of the client at the time the trust is established or any time in the future.
n Trusts that allow for payments to the spouse or dependents do not meet this requirement even if the client does not have a spouse or dependent.
n The trust may provide for payment of reasonable and necessary administrative expenses and fees as noted in other requirements.
l The trust must also meet all of the criteria in one of the two types of trusts listed:
n Trust for Disabled Client under Age 65:
m The client must be under age 65 when the trust is established.
q A trust established while a person is under 65 remains excluded when the person reaches 65.
q Any addition to the trust after the client reaches age 65 as an asset transfer. See Asset Transfers.
m The client must be certified disabled by the Social Security Administration (SSA) or State Medical Review Team (SMRT) at the time the trust was established. See Disability Determinations.
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 that the client was disabled at the time the trust was established.
m The trust must be established by the client's parent, grandparent, legal guardian, or a court. The client cannot establish the trust.
m The trust must be funded using the client's own funds, or the funds of others may be used if it is for the sole benefit of the disabled person.
n Pooled Trust For Disabled People.
m The client must be under age 65.
m The client must be certified disabled by SSA and receiving SSI or RSDI payments for the disabled at the time the trust is established.
Note: If the client was not certified disabled by SSA or SMRT at the time the trust was established, SMRT must make a retroactive determination that the client was disabled at that time. See Disability Determinations.
m The trust must be established by the client, the client's parent, grandparent, legal guardian, or a court.
m The separate trust account of the client must be established using the income and/or assets of the disabled person.
m The trust must be managed by a nonprofit association and contain separate trust accounts of more than one person.
Criteria that Negates a Trust from being a Special Needs Trust
Trusts that have the following criteria are not excluded as Special Needs Trusts:
l A trust that allows for payment of debts or expenses before disbursement of the funds in the trust to DHS.
Note: Expenses that are not allowed to be paid first include expenses for last illness and funeral, outstanding debts or any other types of payments.
l A trust that allows for payment of any and all administrative expenses or attorney's fees and trustee's fees.
Note: Allow payment of administrative expenses and fees if the trust contains a provision stating that the expenses and fees must be reasonable.
l Administrative expenses or attorney's and trustee's fees related to termination of the trust before disbursement of the funds to DHS are permissible only if the trust clearly states that it will allow reasonable and necessary administrative expenses approved by one of the following:
n DHS.
n Probate court with advance notice to DHS.
l Trusts that allow for payments to the spouse or dependents, even if the client has no spouse or dependents.
l A Miller Trust or Qualifying Income Trust. These are trusts that are established solely with regular income of the disabled person.