State of Wisconsin
Department of Health Services
Medicaid Eligibility Handbook History
17.13.1 Trusts Introduction
17.13.2 Revocable Trusts
17.13.3 Irrevocable Trusts
"Trust" is any arrangement in which a person (the "grantor") transfers property to another person with the intention that person (the "trustee") hold, manage, or administer the property for the benefit of the grantor or of someone designated by the grantor (the "beneficiary"). The term “trust” includes any legal instrument or device that is similar to a trust.
"Legal instrument or device similar to a trust" means any legal instrument, device, or arrangement which, even though not called a trust under state law, has the same attributes as a trust. That is, the grantor transfers property to the trustee and the grantor's intention is that the trustee hold, manage, or administer the property for the benefit of the grantor or of the beneficiary. For purposes of this section, an individual shall be considered to have established a trust if assets of the individual are used to form all or part of the corpus (Re: trusts) Income and/or assets that form the main body of a trust. Assets or income in the trust corpus may be available to a person but the person no longer owns them. Also known as the trust principal. (principal) of the trust.
"Grantor" may be:
The Medicaid member A recipient of Medicaid; formerly referred to as a "client." .
His/her spouse A spouse is that person recognized by Wisconsin law as another person's legal husband or wife. Wisconsin does not recognize common law marriage. .
A person, including a court or an administrative body, with legal authority to act in place of or on behalf of the member or his/her spouse. This includes a power of attorney or a guardian.
A person, including a court or an administrative body, acting at the direction or upon the request of the member or his/her spouse. This includes relatives, friends, volunteers or authorized representatives.
A revocable trust Allows the trustor to dissolve the trust. If the trust provides that the trust can be modified or terminated by a court it is considered to be a revocable trust since the grantor or his/her representative, can petition the court to terminate the trust. is a trust that can be revoked, canceled or modified by the grantor or by a court. A trust which is called irrevocable, but which will terminate if some action is taken by the grantor, is considered a revocable trust.
The trust principal of a revocable trust is an available asset. “Trust principal” is the amount placed in trust by the grantor plus any trust earnings paid into the trust and left to accumulate.
All payments from the trust to or for the benefit of the institutionalized person are income.
All payments from the trust that are not to or for the benefit of the institutionalized person are divestment.
An irrevocable trust is a trust that cannot, in any way, be revoked by the grantor.
The following actions are divestment if they took place during the lookback period (17.3 Look Back Period) or any time after:
An irrevocable trust was created. The divested amount The net market value minus the value received. is the total amount of the created trust.
Sometimes revocable trusts contain a clause that causes them to become irrevocable at a later date in the life of the trust. Divestment occurs on the date the trust changed from revocable to irrevocable.
Example 1: In 1998 Benny created a revocable trust fund of $100,000 for his daughter. There was a clause in the trust stating the trust would become irrevocable if Benny became incompetent. He was determined incompetent on February 2, 2007, and the trust changed from revocable to irrevocable. Benny entered an institution and applied for Medicaid in July, 2008. He divested the total amount of the trust on February 2, 2007.
Funds were added to the irrevocable trust. The divested amount is the amount of the added funds.
If either of these actions took place before the lookback period, apply the following rules:
Payments to the institutionalized person from trust income or from the body of the trust are income.
Payments that could be disbursed to the institutionalized person from trust income or from any portion of the body of the trust but that are not disbursed are available assets.
Payments from the trust to anyone other than the institutionalized person are divestment.
The policies described in this trusts section do not apply to any of the following trusts.
Annuities (17.11 Annuities).
Irrevocable burial trusts (16.5.1 Burial Trusts).
Trusts established by a will.
Special Needs Trusts - A trust containing assets of an individual under age 65 who is totally and permanently disabled (under SSI Supplemental Security Income. A program based on financial need operated by the Social Security Administration that provides monthly income to low income people who are age 65 or older, blind or disabled. program rules) Disregard An amount not counted when determining a person's total net income. the trust if it meets these conditions.
The trust must be established for the sole benefit of the disabled person by his/her parent, grandparent, legal guardian or a court, and
Contain a provision that, upon the death of the beneficiary, the Wisconsin Medicaid program will receive all amounts remaining in the trust not in excess of the total amount of Medicaid paid on behalf of the beneficiary.
The exception continues after the person turns 65, provided s/he continues to be disabled. However, a grantor cannot add to the trust after the beneficiary turns 65. Anything added to the trust after the beneficiary turns 65 is a divestment. Money added before the beneficiary turns 65 is not a divestment.
Pooled Trusts Not Subject to Divestment
These are trusts for disabled persons as determined by SSI rules. Disregard them if they meet the following conditions:
Are established and managed by a non-profit association. The pooled trust can contain funds that hold accounts funded by third parties for the benefit of the disabled person's own assets or income, and
Have separate accounts, within each fund, which are maintained for each beneficiary or the trust, but for purposes of investment and management of funds, the trust pools these accounts. There may be a separate fund with accounts that include or benefit persons who do not have a disability The law defines disability for Medicaid ( MA ) as: 'The inability to engage in any substantial gainful activity ( SGA ) by reason of any medically determinable physical or mental impairment(s) which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months.' Substantial gainful activity is currently defined as gross income of $900 or more per month. See the Medicaid Purchase Plan (MAPP) chapter for the MAPP disability definition. , and
Contain accounts with the funds of disabled individuals (based upon SSI and Medicaid rules) that are established solely for their benefit by a parent, grandparent, or legal guardian of such individuals, by such individuals, or by a court. If the account includes a residential dwelling, the individual must reside in that dwelling, but a spouse, caregiver or housemate can also live there with the Medicaid applicant A person who has submitted a request for coverage for whom no decision has been made regarding eligibility /recipient, and
Repay Medicaid to the extent that amounts remaining upon death are not retained by the trust.
This requirement can be satisfied when the individual trust account contains liquid assets and has a balance by returning that amount to the Medicaid program after subtracting a reasonable amount for administrative costs.
This requirement can also be satisfied when the pooled trust account includes real property Real property means land and most things attached to the land, such as buildings and vegetation. , and the real property is retained by the pooled trust so long as the property continues to be used by another Medicaid recipient who is disabled (as established under SSI rules) or elderly Anyone age 65 or older. (age 65 years or older). In addition, if the account contains liquid assets that had been used to help maintain the real property, the account funds may be retained to continue to maintain the housing that will be used by another Medicaid recipient, and
The trust was established for a disabled individual who was under age 65 at the time the trust was created, or the trust was established prior to September 1, 2008 for a disabled individuals age 65 or over.
Pooled Trusts Subject to Divestment
A pooled trust established on or after September 1, 2008 for a disabled individual, age 65 or over will not be exempt from the divestment penalty provisions. Similarly, contributions/additions to a pooled trust made after the disabled beneficiary turns 65 will also be subject to divestment penalty provisions.
Pooled Trusts For Individuals Not Yet Declared Disabled
Pooled trusts for individuals applying for disabilty status are not subject to divestment if:
they have placed their assets in a potential pooled trust, and
they meet all of the conditions in 5 I above, and
they initiated the disability determination process prior to 09/01/08, and
they are over age 65.
“Initiating the disability determination process” means that the individual must have asked either the county agency, the Social Security Administration, or DDB A state program providing payments and reimbursement of medical expenses for people injured on the job. for a disability determination.
Note: Unlike Special Needs and Pooled Trusts, trusts for disabled individuals are not required to have any type of Medicaid "payback provision" which becomes effective upon the death of the beneficiary.
This page last updated in Release Number: 08-03
Release Date: 08/13/08
Effective Date: 09/01/08