TRUSTS USING THE ASSETS OF THE INDIVIDUAL OR SPOUSE (FAM)

SR 14-04 Dated 01/14

Previous Policy

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Trusts or similar legal devices established with the individual’s or spouse’s own assets:

• after August 10, 1993; or

• prior to August 10, 1993, but to which additional funds were added after that date.

The following requirements apply regardless of:

• the purpose for which the trust or similar legal device was established;

• any restrictions on distributions or their use; or

• whether the trustees or similar entities can exercise discretion under the trust.

No clause or requirement in the trust, no matter how specifically it applies to *state or federal programs, will preclude a trust from being considered under this section. Where a trust includes assets of others as well as the individual, this policy applies only to the assets attributable to the individual.

Revocable Trusts

Revocable trusts can be revoked by the grantor and include trusts that are called irrevocable but which will terminate if some action is taken by the grantor.

Treatment: The entire principal of the trust is counted as an available resource to the individual. All trusts must be forwarded to State Office for a trust review. State Office will determine whether the trust is countable as a resource, or any disbursements are countable as income.

• Trust payments made to, on behalf of, or for the benefit of the individual, are considered unearned income to the individual.

• Any payments from the trust which are not made to, on behalf of, or for the benefit of the individual, are considered assets disposed of for less than fair market value.

Irrevocable Trusts

Irrevocable trusts cannot in any way be revoked by the grantor.

Treatment: Treat the principal of the trust as an inaccessible resource. All trusts must be forwarded to State Office for a trust review. State Office will determine whether the trust is countable as a resource, or any disbursements are countable as income.

Exception: If terms of the trust permit payments to, for the benefit of, or on behalf of the individual, treat:

• payments of income or payments from the principal of the trust made to or benefiting the individual as unearned income;

• income from the principal of the trust which could be paid to or for the benefit of the individual, but is not, as a resource available to the individual;

• any portion of the principal of the trust that could be paid to or for the benefit of the individual, but is not, as a resource available to the individual; and

• any payments of income or principal of the trust which are not paid to or for the benefit of the individual as a transfer of assets for less than fair market value, effective with the date of transfer.

If some or none of the trust can be paid to the individual, treat:

• payments of income or payments from the principal that can be made to or for the benefit of the individual, as unearned income or as a resource available to the individual; and

• that portion of the principal or income on the principal which cannot be paid, as a transfer of assets for less than fair market value.

In treating portions of the principal or income which cannot be paid to the individual as a transfer of assets, the transfer date is the date the trust was established or, if later, the date payment to the individual was restricted or eliminated.

To Determine the Amount Transferred for Less Than Fair Market Value

• Do not subtract any payments made after the date the trust was established or, if later, the date payment to the individual was restricted or eliminated.

• Funds added to the trust after the above dates constitute a new transfer of assets effective as of the date those funds were added to the trust.

• The value of the transferred amount is not less than its value on the date the trust was established or the date that access to the principal of the trust was restricted or eliminated.

Any payments from the income or principal of the trust made to another entity for the benefit of the individual, are considered payments made to the individual.

Exceptions:

• An irrevocable burial trust established by an individual for the purpose of paying for expenses associated with the individual’s funeral and burial, is an exempt trust if:

- the individual has a signed contract with a funeral home; and

- the principal of the trust does not exceed the contracted amount.

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References: He-W 656.04(a)(7), (a)(11), (a)(12), & 42 USC 1396p(d)