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Effective: December 1, 2006 |
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19.25.35.30ar1 - Trusts Established On or After August 11, 1993 (Archive) |
Archived: March 1, 2008 |
This section applies to trusts established on or after August 11, 1993 that meet certain criteria.
For trusts established before August 10, 1993, or trusts which were established before August 10, 1993 but have changed or had additional resources added after August 10, 1993 without being dissolved and re-established, see Trusts Established Before 8/11/93.
To be a client established trust the following three criteria must be met:
l Not established by a will.
l Established by one or more of the following:
n The client.
n The client's spouse.
n The client's representative, including a court or administrative body with legal authority to act in place of or on behalf of the person or spouse. This includes proceeds from litigation when the court uses these to fund a trust.
l Are funded by the income and/or assets of the client or the client’s spouse.
n When the income or assets of other people are used to fund the trust, this section only applies to the client and spouse's portion of the trust.
n Determine the client's/spouse's portion of the trust by dividing the total value of the trust corpus by the value of the income and/or assets owned by the client or his or her spouse before placing it into the trust.
Follow the steps below to evaluate a trust established on or after August 11, 1993:
1. Determine if the trust can be excluded as a Supplemental Needs Trust, Special Needs or Pooled Trust. The trust corpus’ of these types of trusts are excluded. If the trust is not one of these types continue with the steps.
2. Do not consider any of the following stipulations that may be contained in the trust document when executing the steps which follow:
n Purpose, whether limited or unlimited, for which the trust was established.
n Whether the trustee has discretion or discretion is actually exercised.
n Whether there are any restrictions on when or whether distributions may be made.
n Whether there are any restrictions on the use of distributions from the trust.
3. Determine if the trust is revocable or irrevocable.
a. For non-excluded revocable trusts:
m Count either:
q The entire trust corpus, interest, or gain from investing the principal.
q The portion of the trust corpus, interest, or gain from investing the principal that is attributable to the client if it was jointly funded.
m Disbursements made from the trust to purchase items for the client or that are put into a different type of account are considered an asset conversion.
m Payments made from the trust that are not made to the client or are not for the benefit of the client are considered an asset transfer. See Transfers.
b. For non-excluded irrevocable trusts created before July 1, 2005, or created on or after July 1, 2005 and client is not applying for payment of MA LTC services:
m Count the amount available for distribution when a payment can be made from the trust principal or income earned by the trust to or for the benefit of the client.
m Disbursements from the trust that are not liquid assets are considered an asset conversion.
m Payments made from the trust for any purpose other than to the client or for the benefit of the client are considered an asset transfer. See Transfers.
m When no distributions from the trust can be made under any circumstances, either from the principal or income earned by the trust, consider the trust principal and income earned by the trust as a transfer. See Transfers.
m Self Settled trusts that do not benefit a third party may be revocable even if they state they are irrevocable.
c. For non-excluded irrevocable trust created on or after July 1, 2005 and the client is applying for payment of MA LTC services:
m These trusts become revocable and available with the application for payment of MA LTC services, regardless of the state in which the trust was created.
m Count the entire amount of the trust corpus, including any trust income that has not been disbursed, toward the client’s asset total.
m Only count the value of the corpus that can be attributed to the client or the client’s spouse. Use a percentage of the original amount used to fund the trust if others’ funds or assets were also used to set up the trust.
m Do not count the value of an asset held in the trust that is otherwise excluded by MA.
Example:
A homestead where the community spouse is currently residing.
m No asset transfer need be assessed for these trusts.
Example:
John is applying for MA in August 2005. He is single and lives in the community. He reports owning an irrevocable trust he established on July 2, 2005 with $100,000 he received as an inheritance from his brother. The trust provisions prohibit the trustee from paying any amount of the trust principal or income to John.
Action:
1. The trust cannot be excluded.
2. Despite the provisions regarding disbursement from the trust it must be evaluated.
3. The trust was established after July 1, 2005 however John is not applying for payment of LTC services, and the trust is not available. It will not be counted toward John’s asset total, however a transfer of assets will be assessed.
John enters a LTCF on December 8, 2005 and applies for payment of LTC services on December 12, 2005.
Action:
1. The trust cannot be excluded.
2. Despite the provisions regarding disbursement from the trust it must be evaluated.
3. $100,000 of the trust and any interest or dividends earned on the trust will be counted toward John’s asset total. The trust was established after July 1, 2005 and John is applying for payment of LTC services. The trust corpus and undisbursed income are counted toward John’s asset total, based on the percentage of John’s funds/assets used to set up the trust, which is 100%. The transfer of these assets do not need to be evaluated as an improper transfer or have a transfer penalty applied.
4. Determine whether the value of an available trust should be waived as a counted asset due to undue hardship to the client.
a. The client must request the waiver.
b. See Waiver of Trust Value.
If necessary, contact the county attorney or follow your agency's HealthQuest procedures for a determination concerning whether a trust is available.
The counted value, excluded value and availability of other trusts that do not meet the criteria as a Client Established Trust have different criteria depending on program.
l MinnesotaCare, MA Method A and GHO:
The client must contact the trustee to determine whether any trust funds are available if the trust was established by a third party not using the assets or income of the client.
n Approve or continue eligibility while the client is contacting the trustee.
m Applicants have 30 days from receipt of the written agency request, or until the end of the month of application, whichever is later, to begin this action.
m Enrollees have 30 days from the date of the written agency request to begin this action.
n Consider the trust funds unavailable and do not count toward the client’s asset total until the client gains access to the funds.
l MA Method B and GAMC:
Consider the trust corpus to be unavailable, and not counted toward the client’s asset total, if the client's access is restricted, if the trust was established by a third party not using the assets or income of the client. Restricted access means only a trustee can withdraw funds from the trust corpus.
A client who is a beneficiary entitled to trust income must contact the trustee to determine if the trustee will disburse trust income to him or her.
Approve or continue eligibility while the client is contacting the trustee.
Some trusts have provisions, known as exculpatory clauses, which limit trust benefits to the beneficiary or diverts trust benefits to someone else if the beneficiary applies for or becomes eligible for public assistance, including MA.
l Such provisions in most trusts created in Minnesota on or after 7-1-92 are unenforceable. This includes trusts set up in a will with the client as beneficiary.
l Supplemental Needs Trusts are exempt from these restrictions.
l Request a county attorney opinion, or follow your agency's HealthQuest procedures for a determination regarding availability.
Example:
Mr. Williams executed his will on January 2, 1991. 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. Because the trust was created by a will executed before July 1, 1992, the provision diverting benefits to the son is probably enforceable.
Action:
Request a determination from the county attorney or DHS HealthQuest.
Example:
Mr. Stevens placed most of his assets in a trust naming himself as beneficiary on June 5, 1994. 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 enters a nursing home on February 15, 1998. The trustee states that no funds will be made available for Mr. Steven's medical care.
Action:
Because the trust was created after July 1, 1992, this provision is unenforceable. Request a determination from the county attorney or follow your agency's HealthQuest procedures.
l Client Established - Revocable Trusts.
Count payments made directly to the client as income in the month received.
l Client Established - Irrevocable Trusts.
Count payments made to the client as income in the month received.
Count undisbursed trust income as an asset for clients applying for payment of LTC services who own a client established irrevocable trust which was created on or after July 1, 2005.
Note: If the trust corpus was created with funds/assets of people other than the client, or the client’s spouse, count a percentage of the undisbursed income based on the original percentage of funds/assets the client or client’s spouse used to fund the trust.
l Other Trusts.
Count payments made to the client as income in the month received.
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.
Undue hardship means that either:
l A client may be forced to go without life sustaining services because the trust funds could not be made available to pay for the needed services.
l When the trust provisions are applied it would deprive a client of medical care and endanger his/her health or life.
Send the client a notice of the client's rights to request an undue hardship waiver when part of the trust is counted.
If a 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.