19.25.35.30 Trusts Established and Funded by Third Parties

*** The Health Care Programs Manual (HCPM) has been replaced by the Minnesota Health Care Programs Eligibility Policy Manual (EPM) as of June 1, 2016.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. ***

Third Party Established and Funded Trusts

A trust can be established and funded by a person other than the client or the client’s spouse (third party) for the benefit of a client during the grantor’s lifetime or under the grantor’s will.

A trust established under a third party grantor’s will is called a testamentary trust. A testamentary trust is established at the time of the grantor’s death, rather than at the time the will was created. However, if the beneficiary is entitled to any part of the corpus or income under the terms of the trust, it may not be available until the grantor’s estate is settled.

A trust funded by a third party during his or her lifetime is called an inter vivos or living trust.

Trusts funded by a third party that meet the requirements of a Supplemental Needs Trust are evaluated under the policy for Supplemental Needs Trust, not under Third Party Trust policy.

A trust created on or after July 1, 1992, by a third party that contains a provision providing for the suspension, termination, limitation or diversion of the trust corpus, income or beneficial interest of a beneficiary if the beneficiary applies for, is eligible for, or receives public assistance or benefits under a public health care program are invalid and unenforceable as against public policy under state law. The unenforceability of such a trust provision applies without regard to the irrevocability of the trust or the purpose for which the trust was created. The invalidation of this type of provision linked to receipt of public assistance does not invalidate the trust.

For the purposes of this policy, a trust provision is ”created” on the date of execution of the first instrument containing the provision, even if the trust provision was later amended, reformed, or the trust was not funded until a later date.

Exception: A trust established by a third party that meets the requirements of a Supplemental Needs Trust is evaluated as a Supplemental Needs Trust, not as a Third Party Funded and Established Trust.

Request a county attorney opinion for questions regarding whether the statute above applies to a provision in the trust. Submit a HealthQuest for a determination regarding the availability of the trust if a county attorney opinion is not available.

When the client is a current beneficiary under a trust established and funded by a third party, evaluate the trust for availability. Evaluation of trust availability requires a careful review of the terms of the trust. The terms of a trust may provide for disbursements to the beneficiary although none are being issued by the trustee. A beneficiary with a vested interest in a trust has, under some circumstances, legal standing to ask a court to require distributions from the trustee.

The client must contact the trustee to determine whether any of the trust funds are available to the client. Approve or continue eligibility while the client is obtaining this information from the trustee.

Consider the trust funds unavailable and do not count them toward the client’s asset total until the client gains access to the trust funds.

n Applicants have 30 days from the receipt of the agency’s written request, or until the end of the processing period, whichever is later to begin this action.

n Enrollees have 30 days from the date of the agency’s written request to begin this action.

Do not count the trust corpus as an asset if the trust meets the requirements of a Supplemental Needs Trust.

Determine whether the trust can be classified as a discretionary trust, a discretionary trust with support standards, or a support trust. Request an opinion from the county attorney if the classification of the trust is unclear. Submit a HealthQuest if a county attorney opinion is not available.

A Discretionary Trust is a trust with provisions that grant the trustee(s) absolute discretion regarding whether distributions from the trust will be made. A Discretionary Trust gives the trustee(s) complete discretion to distribute all, some or nothing from the trust.

If the trust provides that neither the trustee nor the court can invade the corpus to make disbursements to the beneficiary, treat the trust corpus as unavailable to the client even when:

m The trust can be revoked by someone other than the client or the client’s spouse; or

Note: When the client is a beneficiary of a testamentary trust, the maximum distribution available to the client from the trust (including provisions permitting invasion of the corpus for the client’s support and maintenance) does not mean the maximum distribution available is actually made available to the client.

Consider the trust corpus to be unavailable if the client’s access is restricted. The trust is restricted if the client beneficiary cannot compel the trustee to make disbursements to the client. If the trust provisions provide that neither the trustee nor the court can invade the corpus to make disbursements to the beneficiary, treat the trust corpus as unavailable to the client.

A Discretionary Trust with Support Standards is a trust that includes trust provisions granting the trustee absolute discretion, but also includes standards of support for the beneficiary which limits the trustee’s discretion. Seek a county attorney opinion to evaluate the trust. Submit a HealthQuest if a county attorney opinion is not available.

Count entire trust corpus as available when the trust contains provisions permitting disbursements from the corpus for the client’s health or medical care.

A support trust is a trust with provisions that direct the trustee(s) to restrict the use of the trust for the beneficiary’s basic support needs such as food, clothing, medical care and education. Count the entire corpus of a support trust as an available asset for MA purposes.

Any disbursements made to a client who is the beneficiary of a third party trust are treated as unearned income.

n Income produced by the trust that the beneficiary has no right to receive (for example, the trust requires the income from the trust to be added to the trust corpus).

Chapter 19 - Assets	Effective: June 1, 2011
19.25.35.30 - Third Party Established and Funded Trusts	Archived: June 1, 2016 (Previous Versions)