State of Wisconsin Department of Health Services

HISTORY

The policy on this page is from a previous version of the handbook. 

21-01 Version of 16.6 Non-Burial Trusts

16.6.1 Non-Burial Trusts Introduction

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:

1. The EBD Medicaid memberA recipient of Medicaid; formerly referred to as a "client.",
2. His or her spouseA spouse is that person recognized by Wisconsin law as another person's legal husband or wife. Wisconsin does not recognize common law marriage.,
3. A person, including a court or an administrative body, with legal authority to act in place of or on behalf of the member or the member’s spouse. This includes a power of attorney or a guardian, or
4. A person, including a court or an administrative body, acting at the direction or upon the request of the member or the member’s spouse. This includes relatives, friends, volunteers or authorized representatives.

If the principal of a trust includes assets of the applicantA person who has submitted a request for coverage for whom no decision has been made regarding eligibility/member or spouse, and the assets of any other person or persons, apply the policies in Section 16.6.3 Revocable Trusts and Section 16.6.4 Irrevocable Trusts to the portion of the trust attributable to the assets of the applicant/member or spouse.

16.6.2 Trust Principal

The trust principal is the amount placed in trust by the grantor plus any trust earnings paid into the trust and left to accumulate.

16.6.3 Revocable Trusts

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.

16.6.4 Irrevocable Trusts

An irrevocable trust is a trust that cannot, in any way, be revoked by the grantor.

16.6.4.1 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.

16.6.4.2 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 distributions may be made from the trust; or,
• any restrictions on the use of distributions from the trust.

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(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 fund) 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.

 

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.

 

Example 3:

Dave is a 65 year old Medicaid applicant who won a $250,000 lottery several years ago and put the entire amount into an irrevocable trust, naming himself as the beneficiary. Dave appointed his brother Don as the trustee. Under the terms of the trust, none of the trust principal could ever be distributed to Dave during his lifetime. Don could only distribute the income that is produced by the trust to his brother Dave, and Don has sole discretion as to whether or not any income is actually distributed. The trust principal would be an unavailable asset since the terms of the trust prohibit any distribution of trust principal during Dave’s lifetime. Any disbursements of trust income to Dave would be counted as income to Dave in the month of receipt. Because Don has the authority to distribute all of the income, any trust income which is not disbursed by Don, but instead remains in the trust, is considered to be an available asset.

 

Example 4:

In this example, use the same facts as in example 3, except that the trust requires Don to distribute fifty percent of the generated income to Dave and add the remaining fifty percent to the principal where it will accumulate without distribution. The half of the generated income that is paid to Dave would be income in the month of receipt. The other half of the income would be an unavailable asset and tested for divestment

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 (see Section 17.13 Trusts and Section 17.13.4 Exceptions).

The policies described above regarding irrevocable trusts do not apply to Special Needs and Pooled Trusts described in Section 16.6.5 Special Needs Trust and Section 16.6.6 Pooled Trusts. The policies described above also do not apply to irrevocable trusts created by a will, unless the terms of the trust permit the individual/beneficiary to require that the trustee distribute principal or income to him or her.

16.6.5 Special Needs Trust

Disregard special needs trusts, also called supplemental needs trusts, whose sole beneficiary is under age 65 and totally and permanently disabled (under SSISupplemental 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) if they meet all of the following conditions:

• Established for the sole benefit of the disabled person.
  • Trusts established prior to December 13, 2016 may not be set up by the member.  They may only be established by the following:
    • the member's parent
    • the member's grandparent
    • the member's legal gaurdian
    • the court on the member's behalf
  • Trusts established on or after December 13, 2016 may be set up by the member. They may also be established by the following:
    •  
    • the member's parent
    • the member's grandparent
    • the member's legal gaurdian
    • the court on the member's behalf
• Established with the resources of the disabled individual.

  Note:

  If a legally competent, disabled adult does not establish the trust, a parent or grandparent may establish a seed trust using a nominal amount of his or her money (e.g., $10). After the seed trust is established, the disabled adult’s assets can be transferred into the trust.

• Contain a provision that, upon the death of the beneficiary, Wisconsin Medicaid will receive all amounts remaining in the trust not in excess of the total amount  of Medicaid paid on behalf of the beneficiary.

Trusts that meet the above criteria but are not called a special or supplemental needs trust are treated as special needs trusts for Medicaid purposes. Trusts that are called special or supplemental needs trusts but do not meet the above criteria are not treated as special needs trusts for Medicaid purposes and availability must be determined according to the criteria in 16.6.3 Revocable Trusts or 16.6.4 Irrevocable Trusts.

The funds deposited in, contributions to, and distributions from the special needs trust are disregarded. The exception continues after the person turns 65, provided he or she 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.

16.6.6 Pooled Trusts

Disregard pooled trusts for disabled persons managed by:

1. WISH Pooled Trust
2. WisPACT Trust I
3. ARC of Greater Milwaukee, Inc. Community Trust II

The WISH Pooled Trust and the WisPACT Trust I must meet the following conditions:

1. 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.
2. 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 disabilityThe law defines disability for Medicaid 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.".
3. 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/member.
4. For WISH Trusts, 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/member. This requirement does not apply to WisPACT trusts.
5. Repay Medicaid to the extent that amounts remaining upon death are not retained by the trust.
   1. 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.
   2. 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 Medicaid member who is disabled (as established under SSI rules) or elderlyAnyone 65 years old 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 member.

Note:

The assets that have been placed in a potential pooled trust pending a disability determination are unavailable assets until the disability determination has been made. If the individual has been determined disabled by DDBDisability Determination Bureau, the pooled trust is an exempt asset as of the disability onset date. If the individual is not determined disabled, the assets are counted.

16.6.7 Ho-Chunk Tribal Trusts

The Ho-Chunk Tribe, under its tribal ordinances and in conjunction with the Indian Gaming Regulatory Act, establishes irrevocable trusts for tribal members who are minors or determined to be legally incompetent. These irrevocable trusts are funded primarily with per capita distribution payments derived from gaming revenue. DHSDepartment of Health Services has determined that funds placed in these trusts, for the benefit of minors and individuals who are legally incompetent, are considered to be owned by the Ho-Chunk Tribe and not the trust beneficiary. Therefore, the irrevocable Ho-Chunk Tribal Trusts established for minors or legally incompetent tribal members are considered to be unavailable assets for the tribal member’s Medicaid eligibility determination.

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The information concerning the Medicaid program provided in this handbook release is published in accordance with: Titles XI and XIX of the Social Security Act; Parts 430 through 481 of Title 42 of the Code of Federal Regulations; Chapters 46 and 49 of the Wisconsin Statutes; and Chapters HA 3, DHS 2, 10 and 101 through 109 of the Wisconsin Administrative Code.

Notice: The content within this manual is the sole responsibility of the State of Wisconsin's Department of Health Services (DHS). This site will link to sites outside of DHS where appropriate. DHS is in no way responsible for the content of sites outside of DHS.

Publication Number: P-10030