MR #19.17: Trusts (Medical Programs)

Illinois Department of Healthcare and Family Services Illinois Department of Human Services

12/20/19

Summary:

Clarifies trust fund policy for Medical Programs.
Clarifies definition of a trust.
Provides a link for the resource transfer limit for a referral to Long Term Care Asset Discovery Investigation (LTC-ADI).
Clarifies policy for trust established on or after 08/11/93.
Clarifies policy for trust established prior to 08/11/93.
Clarifies policy for exempt trust.
Clarifies the completion of HFS 3703.

Trust Fund (Medical)

A trust is any arrangement in which an individual(s) transfers property (real and/or personal) to a trustee or trustees with the intention that it be held, managed or administered by the trustee or trustees for the benefit of the individual(s) or designated beneficiaries.

An individual is considered to have established a trust if resources of the individual are used to form all or part of the principle of the trust is established by:

the individual;
the individual's spouse; or
anyone, including a court or administrator, with legal authority to act on behalf of the individual.

For AABD, consider only the portion of the resources owned by the individual and/or spouse when resources held in the trust include resources of other individuals.

Trusts may be revocable, irrevocable or exempt.

For a person (AABD, ACA) who receives NH, SLP or DOA Home and Community Based Services (HCBS) waiver services, resources transferred to a trust are subject to resource transfer policy, see Transfer of Resource Policy.

Trust Review by HFS OIG LTC-ADI

HFS OIG LTC-ADI reviews trusts. A brief analysis describing the terms of the trust is sent to the FCRC/LTC hub upon completion of the HFS OIG review. See PM 07-02-20 for the resource transfer limit to refer a Long Term Care case to LTC-ADI for review.

Community Cases

Complete form IL 444-2150 to send trusts for AABD community cases to HFS OIG LTC-ADI for review.

Trusts are sent via email to HFS.OIG.LTC-ADI-Legal@illinois.gov or faxed to 217-524-3103.

NH, SLP and DOA HCBS

Refer AABD and ACA applications and active cases requesting NH, SLP or DOA HCBS waiver services to HFS OIG LTC-ADI when the applicant or person requesting services has a trust.

Referrals are sent to via email to HFS.OIG.LTC-ADI@illinois.gov or faxed to 217-524-3103.

Trusts Established on or After 08/11/93

Revocable Trusts

Revocable trusts can be revoked.

Resources held in a revocable trust are an available resource.

Transfers from resources held in a revocable trust are subject to resource transfer policy, see Transfer of Resource Policy.

Irrevocable Trusts

Irrevocable trusts cannot be revoked.

Some irrevocable trusts permit withdrawals to be made from the resources held in the trust.

Withdrawals Permitted by the Irrevocable Trust

Resources held in an irrevocable trust that permits withdrawals are an available resource. Transfers from resources held in an irrevocable trust that permits withdrawals are subject to resource transfer policy, see Transfer of Resource Policy.

Withdrawals Not Permitted by the Irrevocable Trust

Resources added to an irrevocable trust that does not permit withdrawals are subject to resource transfer policy see Transfer of Resource Policy.

The date of transfer is the date the trust is established and the resource(s) are added to the trust or the date resources are added to the trust after the trust is established.

Revocable-Irrevocable Trust Resource(s) in IES

A trust is an arrangement that allows a third party to hold resources on behalf of beneficiaries. A trust is funded with a person's real and personal property. Resources held in a trust may or may not be considered as available to compare to the resource limit. The terms of the trust establish if resources used to fund the trust are countable or not.

Revocable Trusts and Irrevocable Trusts that Permit Withdrawals

Resources held in a revocable trust and an irrevocable trust that permits withdrawals are available resources. Enter the resource type and amount (savings, checking, real property) in IES. Document in case comments the name of the trust and the resource(s) held in the trust.

Example: Jane Abcd has an active medical case. She also has a checking account that is held in the Jane Abcd revocable trust. The FCRC sends a copy of the trust to HFS OIG LTC-ADI. HFS OIG LTC-ADI reviews the trust and notifies the FCRC that the resources held in the trust are available. The FCRC enters the checking account as a liquid resource in IES. Do not enter the balance of the checking account on the trust page. Document in case comments that Jane has a checking account and it is held in the Jane Abcd revocable trust.

Irrevocable Trusts that Do Not Permit Withdrawals

When the terms of a trust do not allow withdrawals from the resources held in the trust, the resource is not available to count towards the resource limit. Enter the resource type and amount in IES, mark the resource as inaccessible. Document in case comments the name of the trust and the resource(s) held in the trust.

For persons applying for or receiving NH, SLP or DOA Home and Community Based Services (HCBS) waiver services:

A resource(s) becomes unavailable when the resource is transferred to a trust and the trust does not allow withdrawals from the trust. When a person receives LTC services and the person has a resource that becomes unavailable, the resource is subject to resource transfer policy. The date of transfer is the date the trust is established and the resource is added to the trust or the date resources are added to the trust after the trust is established.

Enter the resource type and amount (savings, checking, real property) in IES and complete resource transfer fields. Document in case comments the name of the trust and the resource(s) held in the trust.

Example 1: Paul has an active medical case. Paul also has an irrevocable trust that does not permit withdrawals from the resources held in the trust. Paul does not live in an NH, SLP or receive DoA HCBS. The FCRC sends a copy of the trust to HFS OIG LTC-ADI. HFS OIG LTC-ADI reviews the trust and notifies the FCRC that the resources held in the trust are not available. The FCRC enters the resource(s) on the appropriate resource page(s) in IES and marks the resource(s) as inaccessible. The FCRC does not enter the balance of the resource(s) held in the trust on the trust page. Document in case comments the irrevocable trust that does not permit withdrawals and the resources held in the trust.

Example 2: Bill is applying for medical benefits because he moved to a NH. Bill has an irrevocable trust that does not permit withdrawals from the resources held in the trust. The trust was established 6 months prior to Bill applying for medical benefits. At the time the trust was established Bill funded the trust with 2 CD's (valued at $10,000 each) and an investment account (valued at $50,000). The LTC hub sends a copy of the trust to HFS OIG LTC-ADI. HFS OIG LTC-ADI reviews the trust and notifies the LTC hub that the resources held in the trust are not available. The LTC hub applies PM 07-02-20-c and determines that the transfer of resources to the trust made the resources inaccessible for Bill to use towards his cost of care in the nursing home and therefore the transfer is unallowable. The LTC hub enters the resource(s) and completes the resource transfer page(s) in IES for each resource held in the trust. The FCRC does not enter the balance of the resource(s) held in the trust on the trust page. Document in case comments the name of the irrevocable trust, note that the trust does not permit withdrawals, and the resources held in the trust.

Trusts Established Prior to 08/11/93

A "Medicaid Qualifying Trust" established prior to 08/11/93 is a trust set up (other than by will) by using the individual's and/or spouse's property (real and/or personal) and meets all of the following criteria:

the individual is the beneficiary of all or part of the trust payments; and
the amount of potential payments from the trust is determined by one or more trustees who have discretion over how much can be distributed to the individual.

The maximum amount of payment permitted under the terms of a Medicaid Qualifying Trust is considered in determining eligibility for medical assistance regardless of whether the maximum amount is distributed to the individual. The resource value of the trust is only determined once and that is when it is first evaluated by HFS OIG LTC-ADI and the maximum distributable amount is determined.

The maximum amount is only considered in determining eligibility for medical assistance, whether or not the trust is irrevocable or established for reasons other than to qualify for Medicaid.

Exempt Trusts

The following trusts are exempt:

Self-Sufficiency Trust Fund

Is a trust created by a not for profit corporation for the purpose of providing for the care, support or treatment of one or more individuals with a developmental disability.

Irrevocable Trust

Established for an individual under age 65 who is disabled as determined by the Social Security Administration, or DHS's Client Assessment Unit (CAU). The trust is exempt if:

the trust is created on or after 08/11/93; and
the trust is created for the benefit of the individual by the parent, grandparent, legal guardian of such individual, by such individual, or by a court; and
the trust contains language which states any amount remaining in the trust (up to the amount paid by Medicaid) will be paid to HFS at the time of death.

If the trust contains proceeds from a personal injury award, any HFS or DHS charge must be satisfied first from the award before the trust is treated as an exempt resource.

Effective 07/01/12, the trust remains exempt after the person reaches age 65 but any resources added to the trust after the person reaches age 65 is considered a transfer for less than fair market value unless the person is a ward of the county public guardian or the State guardian.

Example: Pam lives in a nursing facility and has been adjudicated disabled by SSA since birth. Her parents set up an irrevocable trust and funded it with proceeds from a settlement. The LTC hub sends a copy of the trust to HFS OIG LTC-ADI. HFS OIG reviews the trust and notifies the LTC hub that the trust is exempt. When Pam is 35 years old her dad receives an inheritance from his grandfather and puts the money into the irrevocable trust. The additions to the trust are not subject to resource transfer policy because Pam is not over 65 years old.

Pooled Trust

Is an irrevocable trust established for an individual of any age who is disabled, as determined by the Social Security Administration or DHS CAU. The trust is exempt if:

the trust is created on or after 08/11/93; and
the trust is created and managed by a nonprofit organization; and
a separate account is maintained for each individual, but for management purposes the trust pools funds; and
the account is set up for the benefit of the individual by the parent, grandparent, legal guardian of such individual, by such individual, or by a court; and
the trust contains language which states any amount remaining in the trust (up to the amount paid by Medicaid) that is not retained by the trust for reasonable administrative costs related to resolving the affairs of the subaccount will be paid to HFS at the time of death.

If the trust contains proceeds from a personal injury award, any HFS or DHS charge must be satisfied first from the award before the trust is treated as an exempt resource.

Example: Tom is determined disabled by SSA and moves to a nursing facility when he is 60 years of age. A disability pooled trust is established. The LTC hub sends a copy of the trust to HFS OIG LTC-ADI. HFS OIG reviews the trust and notifies the LTC hub that the trust is exempt. At age 70 Tom receives $10,000 from the sale of home he jointly owned with a brother. Tom adds the $10,000 to the trust. Because a resource (cash) is added to the trust after age 65, the $10,000 is considered a transfer for less than fair market value. The LTC hub calculates the penalty period beginning with the date the $10,000 is added to the trust.

Note: An exception would apply if Tom was a ward of the county public guardian. In that circumstance, the deposit after age 65 would be considered a transfer for fair market value.

HFS 3703 Report of OBRA/Irrevocable Pooled Trusts

Form HFS 3703 is completed for a person with an irrevocable trust containing provisions for the "payback" of medical assistance costs upon the person's death.

The completed form provides BOC with the name of the person who has the trust, the date the trust was created, and the name and address of the trustee.

BOC initiates recovery action of the trust proceeds.