State of Wisconsin
Release 19-02 September 10, 2019
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 Beneficiary means the person(s) entitled to any remaining pay-out of an annuity upon the death of the annuitant."). 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 or 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 or 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 or 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 or 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 look back period (see Section 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 look back 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 (see Section 17.11 Annuities).
Irrevocable burial trusts (see Section 16.5.1 Burial Trusts).
Trusts established by a will.
Special needs trust: A trust containing assets of a person 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 the conditions in Section 16.6.5 Special Needs Trust.
Pooled trusts (Effective 09-01-08).
Pooled Trusts Not Subject to Divestment
Pooled Trusts Subject to Divestment
Third Party Funded Pooled Trusts For Individuals Not Yet Declared Disabled
List of Pooled Trusts
These are trusts for disabled persons as determined by SSI rules. Disregard them if they meet the following conditions:
Note: If a WISH trust 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/member. This does not apply to a WisPACT trust, and
A pooled trust established with the funds of a third party on or after September 1, 2008, for a disabled individual, age 65 or over will not be exempt from the divestment penalty provisions, if the third party subsequently applies for Medicaid. The divestment penalty is applied to the third party who created the pooled trust unless the trust beneficiary is the third party’s disabled child. Similarly, contributions/additions to a pooled trust by a third party, made after the disabled beneficiary turns 65 will also be subject to divestment penalty provisions if the third party (trust grantor) subsequently applies for Medicaid.
Third party funded pooled trusts for individuals applying for disability status are not subject to divestment if:
“Initiating the disability determination process” means that the individual must have asked either the county agency, the SSA, or DDB 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: 18-01
Release Date: 04/13/2018
Effective Date: 04/13/2018