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Wisconsin Department of Health and Family Services Obsolete Medicaid Eligibility Handbook For the current MEH, see http://www.emhandbooks.wi.gov/meh-ebd/ For the current BC Plus Handbook, see http://www.emhandbooks.wi.gov/bcplus/ |
A trust is any arrangement in which a person (the "grantor") transfers property to another person with the intention that the 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 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.
The grantor can be:
The MA client.
His/her spouse.
A person, including a court or an administrative body, with legal authority to act in place of or on behalf of the client or the client’s 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 client or the client’s spouse. This includes relatives, friends, volunteers or authorized representatives.
If the principal of a trust includes assets of the applicant/recipient or spouse, and the assets of any other person or persons, 4.5.6.2 and 4.5.6.3 apply to the portion of the trust attributable to the assets of the applicant/recipient or spouse.
The trust principal is the amount placed in trust by the grantor plus any trust earnings paid into the trust and left to accumulate.
A revocable trust is a trust which 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.
An irrevocable trust is a trust that cannot, in any way, be revoked by the grantor.
4.5.6.3.1 Trust Established with resources of a third party
If the resources of someone other than the individual or their spouse (i.e. a third party),
were used to form the principal of an irrevocable trust, the trust principal is not an available asset unless the terms of the trust permit the individual to require that the trustee distribute principal or income to him or her.
4.5.6.3.2 Trust established with resources of the Individual or Spouse
If the resources of the individual or the individual’s spouse were used to form all or part of the principal of the trust, some or all of the trust principal and income may be considered a non-exempt asset, available to the individual. If there are any circumstances under which payment from the trust could be made to or for the benefit of the individual at any time no matter how distant, the portion of the principal from which, or the income on the principal from which, payment to the individual could be made shall be considered non-exempt assets, available to the individual.
This treatment applies regardless of:
the purpose for which a trust is established;
whether the trustees have or exercise any discretion under the trust;
any restrictions on when or whether distibutions may be made from the trust; or,
any restrictions on the use of distributions from the trust.
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Example #1: Doug is a 65 year old Medicaid applicant. Several years ago, Doug transferred his life savings of $60,000 to an irrevocable trust, naming himself as the beneficiary. Doug’s brother, Jim was appointed as the trustee. Under the terms of the trust, Jim could disburse up to $10,000 annually, from either trust principal or trust income, either directly to Doug or indirectly to provide some benefit for Doug. The trustee had sole discretion as to when and how these trust disbursements would be made, but under no circumstance could they exceed $10,000 in a 12 month period. Because the entire corpus could eventually be distributed, $60,000 would be considered an available non-exempt asset for Doug’s Medicaid eligibility determination, even if the trustee decides not to make any actual disbursements. |
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Example #2: Al is a 65 year old Medicaid applicant. Six years ago, Al sold his farm for $300,000 and put the entire proceeds from the sale into an irrevocable trust, naming himself as the beneficiary. Al’s friend, Scott was appointed as the trustee. Under the terms of the trust, Scott could disburse any amount of trust principal or trust income, at any time, either directly to Al or indirectly to provide some benefit for Al. The trustee had sole discretion as to when and how disbursements would be made as well as the amount that could be disbursed. Therefore $300,000 would be considered an available non-exempt asset for Al’s Medicaid eligibility determination, even if the trustee never makes an actual disbursement.
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Note: If the grantor is an institutionalized person, their spouse, or someone acting on behalf of an institutionalized person, setting up an irrevocable trust may be a divestment (4.7.13.2) and (4.7.13.3).
The policies described above regarding irrevocable trusts do not apply to Special Needs and Pooled Trusts described in chapters 4.5.6.4 and 4.5.6.5 of the Medicaid Handbook.
Disregard special needs trusts funded with the assets of a sole beneficiary, who is under age 65 and totally and permanently disabled (under SSI program rules) 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 MA program will receive all amounts remaining in the trust not in excess of the total amount of MA 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
Disregard pooled trusts for disabled persons managed by:
WISH Pooled Trust
WisPACT Trust I
Note: Contact the CARES CALL Center for instructions on treating any other pooled trusts.
The WISH Pooled Trust and the WisPACT Trust I 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.
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.
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 MA applicant/recipient.
Repay MA 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 MA program after subtracting a reasonable amount for administrative costs.
This requirement can also be satisfied when the pooled trust account includes real property, and the real property is retained by the pooled trust so long as the property continues to be used by another MA recipient who is disabled (as established under SSI rules) or elderly (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 MA recipient.
This page last updated in Release Number: 08-01
Release Date: 01/07/08
Effective Date: 01/07/08
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