SR 05-06 Dated 04/04
Treatment of this type of trust differs based on the date the trust was established.
Trusts Established Before August 11, 1993 ("Medicaid Qualifying Trusts")
Determine if the trust or similar legal device meets all of the following characteristics.
1. The trust or similar legal device was established (except by will) by any of the following:
- individual’s spouse;
- individual’s parent(s), if the individual is a minor;
- individual’s guardian;
- individual’s legal representative; or
- any other person acting on the individual’s behalf.
2. The funds or assets used to establish the trust or similar legal device were the:
- individual’s; or
- individual’s spouse if the spouse’s own assets are counted in the eligibility determination.
3. The individual is the beneficiary of all or part of the distributions from the trust.
4. The amount of distributions from the trust is determined by one or more trustees. The trustees are allowed to exercise discretion regarding the amount to be distributed to the individual.
If all of the above requirements are met, consider the trust or similar legal device as a Medicaid Qualifying Trust (MQT) even if it is irrevocable or was established for purposes other than to enable the individual to qualify for medical assistance. If any one of the above requirements is not met, do not consider the trust or similar legal device an MQT. See Inaccessible Resource and Trusts for proper treatment.
Treatment: Countable Resource, for medical assistance-only cases.
• The maximum distributable amount of the trust counts as a resource. The maximum distributable amount is the amount that could be distributed to the individual, assuming the trustee used full discretion under the terms of the trust.
• Distributions are considered available whether or not the distributions are actually made or the trustee exercises their authority under the trust. Interest that is not disbursed is carried forward and counted as a resource in the month after the month the interest could have been paid to the individual.
Trusts Established After August 10, 1993
Trusts or similar legal devices established:
• 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 Medicaid or other 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 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.
• 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 cannot in any way be revoked by the grantor.
Treatment: Treat the principal of the trust as an inaccessible resource.
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.
• 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.
• Homes are a countable resource when placed into a trust established after 8/10/93, including irrevocable trusts, by individuals applying for or receiving HCBC services or nursing facility care if:
- using their own or their spouse’s assets; and
- the individual, or the institutionalized individual’s spouse, is a beneficiary to the trust.