Long-term services and supports (LTSS) manual

Trusts continued

Revised Date: 
January 31, 2019

Purpose - Describe and clarify rules on how trusts affect Apple Health (Medicaid) eligibility.

WAC 182-516-0110 Self-settled trusts overview.

Effective March 2, 2018

  1. A trust containing the assets of a beneficiary's spouse may be a self-settled trust based on the date it was established. For specific rules regard­ ing this, see WAC 182-516-0130.
  2. To determine whether the assets of the self-settled trust should be counted as income, a resource, or an asset transfer, the medicaid agency or the agency's designee applies the following rules based on when the trust was established:
    1. For revocable self-settled trusts, see WAC 182-516-0115.
    2. For irrevocable self-settled trusts for a disabled client under age sixty-five established on or after August 11, 1993, see WAC 182-516-0120.
    3. For irrevocable pooled self-settled trusts for a disabled client established on or after August 11, 1993, see WAC 182-516-0125.
    4. For all other irrevocable self-settled trusts:
      1. Established on or after August 11, 1993, see WAC 182-516-0130.
      2. Established before August 11, 1993, see WAC 182-516-0135.

 

This is a reprint of the official rule as published by the Office of the Code Reviser. If there are previous versions of this rule, they can be found using the Legislative Search page.

Clarifying Information

A trust’s establishment date is the date the first asset was placed into the trust, not the date the trust was signed.

Before using the self-settled trust rules ensure the trust you are evaluating is self-settled. Trusts established after July 31, 2003 are self-settled even when all assets in the trust were owned by the client’s spouse.

A trust is still self-settled even when the beneficiary/grantor had no control over the establishment of the trust with their assets.

Example: Settlement funds from a lawsuit directed into a trust by a court or a guardian establishing a trust for an incapacitated individual with the individual's assets are both self-settled trusts.

WAC 182-516-0115 Revocable self-settled trusts established on or after August 11, 1993.

Effective March 2, 2018

  1. This section applies to revocable trusts that are self-settled and established on or after August 11, 1993.
  2. This section does not apply to assets in a revocable trust established before August 11, 1993.
  3. A revocable trust is a self-settled trust if:
    1. The assets of the trust are at least partially from the bene­ficiary or the beneficiary's spouse;
    2. The trust is not established by will; and
    3. The trust was established by:
      1. The beneficiary or that beneficiary's spouse;
      2. A person, including a court or administrative body, with legal authority to act in place or on behalf of the beneficiary or that beneficiary's spouse; or
      3. A person, including a court or administrative body, acting at the direction or upon the request of the beneficiary or that beneficiary's spouse.
  4. The medicaid agency or the agency's designee treats assets in a revocable self-settled trust under this section as follows:
    1. Assets are subject to the resource exclusions under chapter 182-512 WAC; however, for an institutionalized individual, the resource exclusion for the home under WAC 182-512-0350 does not apply; and
    2. Assets not excluded under chapter 182-512 WAC are available resources.
  5. Payments from assets in the trust under this section to or for the benefit of the beneficiary are unearned income of the beneficiary.
  6. If unearned income under subsection (5) of this section was from an available resource under subsection (4) of this section, then the value of the available resource will be reduced by the amount of unearned income under subsection (5) of this section.
  7. Any payments from the revocable trust, other than payments under subsections (5) and (6) of this section, are uncompensated asset transfers.

This is a reprint of the official rule as published by the Office of the Code Reviser. If there are previous versions of this rule, they can be found using the Legislative Search page.

Clarifying Information

Generally, a revocable trust can be treated just the same as if the client or spouse (or both) owns the assets directly. This is because they have a choice whether to reacquire the assets in the trust or not.

Resource Example: As of the first of the month, a client has personal property, a car for transportation, and $50,000 in cash in a trust. The countable resource value of the trust is $50,000 because the personal property and car are excluded resources.

Income Example: Using the same trust above, the trustee buys a plane ticket for the client for $1,000 from the trust in February 2018. This withdraw is countable unearned income for February 2018, even if the client did not directly receive the cash. Because the $1,000 in income was withdrawn from the $50,000 in cash, resources for February 2018 would be reduced by $1,000.

Institutionalization Example: Same trust as above, but the client also has their home in the trust. If the client is applying for a noninstitutional Medicaid program (for example, S02 or L52), the home is an excluded resource. However, if the client is institutionalized in a nursing home and is applying for nursing home coverage, or the client is applying for a home and community-based (HCB) waiver, the home is not excluded and is an available resource.

 

WAC 182-516-0120 Irrevocable self-settled trusts for a disabled client under age sixty-five established on or after August 11, 1993.

Effective March 2, 2018

  1. This section governs how the agency or the agency's designee treats self-settled trusts, for a disabled client under age sixty-five established under 42 U.S.C. 1396p(d)(4)(a) on or after August 11, 1993, for medicaid eligibility purposes.
  2. A self-settled trust established on or after August 11, 1993, is not an available resource if:
    1. The beneficiary is under age sixty-five and disabled under WAC 182-512-0050 (1)(c) when the trust is established;
    2. The trust is irrevocable;
    3. The trust was established for the sole benefit of that bene­ficiary;
    4. The trust was established by the beneficiary's parent, the beneficiary's grandparent, the beneficiary's legal guardian, by a court, or on or after December 13, 2016, the beneficiary; and
    5. The trust says that the states that have spent medicaid funds for the beneficiary will receive all amounts remaining in the trust up to the amount of medicaid funds spent for the beneficiary.
      1. For trusts established from August 11, 1993, to July 31, 2003, the trust must pay the states when the beneficiary dies.
      2. For trusts established on or after August 1, 2003, the trust must pay the states when the beneficiary dies, the trust terminates, or the beneficiary's disability ends.
  3. The medicaid agency or the agency's designee does not apply a penalty period to a beneficiary for asset transfers into a trust, described under subsection (2) of this section, when the beneficiary is under age sixty-five as of the date of the transfer.
  4. Assets in trusts under subsection (2) of this section contin­ue to be unavailable resources, even after the beneficiary turns age sixty-five.
  5. Asset transfers to the trust from the beneficiary, after the beneficiary turns age sixty-five, may be subject to a transfer penalty under WAC 182-513-1363.
  6. If a trust does not meet the requirements under subsection (2) of this section, see WAC 182-516-0130.

This is a reprint of the official rule as published by the Office of the Code Reviser. If there are previous versions of this rule, they can be found using the Legislative Search page.

WAC 182-516-0125 Irrevocable pooled self-settled trusts for a disabled client established on or after August 11, 1993.

Effective March 2, 2018

  1. This section governs how the agency or the agency's designee treats pooled self-settled trusts, for a disabled client established under 42 U.S.C.1396p(d)(4)(c) on or after August 11, 1993, for medicaid eligibility purposes.
  2. A pooled self-settled trust established on or after August 11, 1993, is not an available resource if:
    1. The beneficiary is disabled under WAC 182-512-0050 (1)(c) when the trust is established;
    2. The trust is irrevocable;
    3. An account in the trust was established for the sole benefit of that beneficiary;
    4. An account in the trust was established by that beneficiary, the beneficiary's parent, grandparent, legal guardian, or by a court;
    5. The trust was established by and is managed by a nonprofit association;
    6. A separate account is maintained for each beneficiary of the trust, but, for the purposes of the investment and management of funds, the trust pools these accounts; and
    7. The trust says that:
      1. Upon the death of the beneficiary, or, for trust accounts es­tablished on or after August 1, 2003, when the trust account terminates or the beneficiary's disability ends, the funds will remain in the trust to benefit other disabled beneficiaries; or
      2. The states that have spent medicaid funds for the beneficia­ry will receive all amounts remaining in the trust account for that beneficiary up to the amount of medicaid funds spent for the beneficiary.
        1. For trust accounts established from August 11, 1993, to July 31, 2003, the trust must pay the states when the beneficiary dies.
        2. For trust accounts established on or after August 1, 2003, the trust must pay the states when the beneficiary dies, the trust terminates, or the beneficiary's disability ends.
  3. The medicaid agency or the agency's designee does not apply a penalty period to a beneficiary for asset transfers into a trust, described under subsection (2) of this section, when the beneficiary is under age sixty-five as of the date of the transfer.
  4. Assets in trusts under subsection (2) of this section continue to be unavailable resources, even after the beneficiary turns age sixty-five.
  5. Asset transfers to the trust from the beneficiary, after the beneficiary turns age sixty-five, may be subject to a transfer penalty under WAC 182-513-1363.
  6. If a trust does not meet the requirements under subsection (2) of this section, see WAC 182-516-0130.

This is a reprint of the official rule as published by the Office of the Code Reviser. If there are previous versions of this rule, they can be found using the Legislative Search page.

Clarifying Information

There are two exceptions to the normal counting an irrevocable self-settled trust as an available resource. We refer to these trusts by shorthand citation to their statuses in the Social Security Act - a "d4A" trust or a "d4C" trust:

  • 42 U.S.C. 1396p(d)(4)(A) - a self-settled irrevocable trust for a disabled individual established before that individual is age 65.
  • 42 U.S.C. 1396p(d)(4)(C) - a self-settled irrevocable pooled trust for a disabled individual of any age.

These are the only two trusts that require some form of payback language in order to be excluded for Medicaid.

If a trust does not meet the requirements of WAC 182-516-0120 (d4A) or WAC 182-516-0125 (d4C), then rules under WAC 182-516-0130 apply.

WAC 182-516-0130 Irrevocable self-settled trusts established on or after August 11, 1993.

Effective March 3, 2018

  1. This section governs irrevocable self-settled trusts established on or after August 11, 1993, that do not meet the rules under either WAC 182-516-0120 or 182-516-0125.
  2. A trust established on or after August 1, 2003, is a self-settled trust if:
    1. The assets of the trust are at least partially from the bene­ficiary or the beneficiary's spouse, or would have been owned by the beneficiary or the beneficiary's spouse unless diverted by the beneficiary, the beneficiary's spouse, the court, or someone acting on be­half of the beneficiary or the beneficiary's spouse;
    2. The trust is not established by will; and
    3. The trust was established by:
      1. The beneficiary or that beneficiary's spouse;
      2. A person, including a court or administrative body, with le­ gal authority to act in place or on behalf of the beneficiary or that beneficiary's spouse; or
      3. A person, including a court or administrative body, acting at the direction or upon the request of the beneficiary or that beneficiary's spouse.
  3. A trust established from August 11, 1993, to July 31, 2003, is a self-settled trust if:
    1. The assets of the trust are at least partially from the bene­ficiary, or would have been owned by the beneficiary unless diverted by the beneficiary, the court, or someone acting on behalf of the beneficiary;
    2. The trust is not established by will; and
    3. The trust was established by:
      1. The beneficiary;
      2. A person, including a court or administrative body, with le­gal authority to act in place or on behalf of the beneficiary; or
      3. A person, including a court or administrative body, acting at the direction or upon the request of the beneficiary.
  4. This section applies only to the assets contributed to a trust:
    1. Under subsection (2) of this section, by either the benefi­ciary or that beneficiary's spouse; or
    2. Under subsection (3) of this section, by the beneficiary.
  5. The medicaid agency or the agency's designee applies the rules of this section without regard to:
    1. The purpose for establishing a trust;
    2. Whether the trustees have or may exercise any discretion un­der the terms of the trust;
    3. Restrictions on when or whether distributions may be made from the trust; and
    4. Restrictions on the use of distributions from the trust.
  6. Treatment of payments or benefits from trusts established un­ der this section.
    1. Subject to subsection (7) of this section, if there are any circumstances under which payment or benefit from the trust could be made to or for the benefit of the beneficiary, the portion of the principal from which, or the income on the principal from which, payment to the beneficiary could be made is an available resource to the beneficiary, and the payment or benefit from that portion:
      1. Is unearned income when payment or benefit is to or for the benefit of the beneficiary; and
      2. Is an uncompensated asset transfer, if payment or benefit is for any other purpose.
    2. If there are no circumstances under which any payment or any benefit from the trust could be made to or for the benefit of the ben­eficiary, the part of the trust or income of that trust, from which payment or benefit cannot be made, is an uncompensated asset transfer.
  7. For the purposes of subsection (6)(a) of this section, "available resource" means a resource after the resource exclusions under chapter 182-512 WAC are applied; however, for an institutional­ized individual, the resource exclusion for the home under WAC 182-512-0350 does not apply.
  8. If unearned income under subsection (6)(a)(i) of this section was from an available resource under subsection (6)(a) of this section, then the value of the available resource will be reduced by the amount of unearned income under subsection (6)(a)(i) of this section.

This is a reprint of the official rule as published by the Office of the Code Reviser. If there are previous versions of this rule, they can be found using the Legislative Search page.

Clarifying Information

General

By definition, a self-settled trust is established for the benefit of the grantor/beneficiary. When reviewing trusts under this rule, the agency essentially ignores any restrictions or requirements written into the trust. This includes disregarding:

  • The purpose for establishing a trust;
  • Whether the trustees have or may exercise any discretion under the terms of the trust;
  • Restrictions on when or whether distributions may be made from the trust; and
  • Restrictions on the use of distributions from the trust.

After disregarding the above, whether an irrevocable self-settled trust is a resource or not is whether the trust principle or income can be used for the beneficiary. It will be extremely rare, if possible at all, that a self-settled irrevocable trust cannot be used for the benefit of the beneficiary.

Can/Cannot Example 1: An irrevocable self-settled trust states the trust cannot be used for medical expenses for the beneficiary. We disregard this restriction, the trust can be used for the grantor/beneficiary.

Can/Cannot Example 2: An irrevocable self-settled trust gives the trustee complete discretion on when to use trust assets. The trustee states they will never use the trust assets. We disregard the trustee’s discretion, the trust can be used for the grantor/beneficiary.

Once it is determine whether a trust can be used for the beneficiary, we must evaluate the trust’s resources and income.

Resource Example: As of the first of the month, a client has personal property, a car for transportation, and $50,000 in cash in a trust. The countable resource value of the trust is $50,000 because the personal property and car are excluded resources.

Income Example: Using the same trust above, the trustee buys a plane ticket for the client for $1,000 from the trust in February 2018. This withdraw is countable unearned income for February 2018, even if the client did not directly receive the cash. Because the $1,000 in income was withdrawn from the $50,000 in cash, resources for February 2018 would be reduced by $1,000.

Institutionalization Example: Same trust as above, but the client also has their home in the trust. If the client is applying for a noninstitutional Medicaid program (for example, S02 or L52), the home is an excluded resource. However, if the client is institutionalized in a nursing home and is applying for nursing home coverage, or the client is applying for a home and community-based (HCB) waiver, the home is not excluded.

The August 1, 2003 Cutoff

From August 11, 1993, to July 31, 2003, the definition of a self-settled trust for a married individual was narrower than it is today. A trust was only self-settled if all or a portion of the assets in the trust were from the client. This means that if all assets in the trust were solely the spouse’s assets, and the client is the beneficiary, the trust would be third-party. However, we would still analyze whether the trust was a countable resource for the spouse (assuming the spouse could also receive some benefit from the trust). Further, we would need sufficient evidence that all assets in the trust were separate property of the spouse, and not community property.

As of August 1, 2003, it does not matter whose assets of the married couple is in the trust. If the trust is for the benefit of the client, and at least some assets in the trust were from the client or the client’s spouse, it is a self-settled trust.

Additional information about Trusts can be found on the Trusts page.