Long-term services and supports (LTSS) manual

Trusts

Revised Date: 
January 31, 2019

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

WAC 182-516-0001 Definitions

Effective February 2, 2018

"Acquire" means, in the context of trusts, to gain title to, or to gain ownership interest in an asset in a trust. Receiving payment or benefit from an asset in a trust is not acquiring the asset.

"Annuitant" means a person or entity that receives the stream of payments from an annuity.

"Annuity" means a policy, certificate or contract that is an agreement between two parties in which one party pays a lump sum to the other, and the other party agrees to guarantee payment of a set amount of money over a set amount of time.

"Beneficiary" means, in the context of a trust, a person or entity that is entitled to benefit from a trust.

"Grantor" means the person or entity who owned the asset immediately before establishing a trust with that asset.

"Immediate" means, in the context of annuities, an annuity that is fully funded at purchase with no accumulation or deferral to allow accumulation.

"Income" means, in the context of a trust, the undistributed proceeds that a trust principal generates over a period including, but not limited to, interest, dividends, rents and realized gains on the sale or exchange. Any income not disbursed in one period is principal the next period.

"Irrevocable":
     a. For a trust, "irrevocable" means the grantor or someone act­ ing on behalf of the grantor cannot reacquire any portion of the as­ sets in the trust for the benefit of the grantor or unilaterally change the terms of the trust; and the beneficiary or someone acting on behalf of the beneficiary cannot acquire any portion of the assets in the trust for the benefit of the beneficiary or unilaterally change the terms of the trust. A legal instrument that is called irrevocable, but permits acquisition or reacquisition of any portion of the assets if some action is taken by or on behalf of the grantor or the benefi­ciary, is revocable for the purposes of this chapter.

     b. A trust or annuity that is not irrevocable is revocable.

     c. A trust is still irrevocable if it meets the definition under (a) of this definition, but allows modifications to the trust to con- form with changes in trust law, which occur after the establishment of the trust.

     d. For an annuity, "irrevocable" means the contract cannot be canceled and the terms of the contract cannot be changed.

"Principal" means the assets, other than income, that make up the trust, promissory note, or loan.

"Revocable" means the instrument is not irrevocable. See the def­inition of "irrevocable."

"Self-settled trust" means any trust established with assets that were originally owned by the beneficiary, or would have been owned by the beneficiary if they had not been diverted into the trust by the beneficiary, the court, or someone acting on the beneficiary's behalf. Depending on the date a trust is established, a trust may be self-set­tled if the assets were originally owned by the beneficiary's spouse, or would have been owned by the beneficiary's spouse if they had not been diverted into the trust by the beneficiary's spouse, the court, or someone acting on the beneficiary's spouse's behalf.

"Sole benefit" of a beneficiary means a trust benefits no one but that beneficiary, whether at the time the trust is established or at any time during the lifetime of the beneficiary.

"Third-party trust" means a trust established with assets origi­nally owned by someone other than the beneficiary. However, depending on the date a trust is established, a trust may be self-settled if the assets were originally owned by the beneficiary's spouse, or would have been owned by the beneficiary's spouse if they had not been diverted into the trust by the beneficiary's spouse, the court, or some­ one acting on the beneficiary's spouse's behalf. 

"To or for the benefit of" means that a payment or benefit of any sort from a trust is transferred to the beneficiary, another person, or entity such that the beneficiary derives some benefit from the transfer.

"Trust" means:

    a. Any arrangement in which a grantor transfers property to a trustee with the intention that it be held, managed, or administered by the trustee for the benefit of the grantor or another beneficiary; or

     b. Any legal instrument, device, or arrangement similar to a trust in which:

          i. A grantor transfers an asset to another; and

          ii. The grantor transfers the asset intending that it be held, managed, or administered for the benefit of the grantor or another beneficiary.

Trustee" means a person or entity that manages and administers a trust for the beneficiary.

"Uncompensated asset transfer" means the entirety of the fair market value of the asset transferred was uncompensated, regardless of any consideration received in return for the asset.

 

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 182-516-0100 Trust index

Effective March 2, 2018

The medicaid agency or the agency's designee applies the following rules to determine how trusts affect eligibility for medicaid:

  1. WAC 182-516-0105 General rules that apply to all trusts.
  2. WAC 182-516-0110 Self-settled trusts overview.
  3. WAC 182-516-0115 Revocable self-settled trusts established on or after August 11, 1993.
  4. WAC 182-516-0120 Irrevocable self-settled trusts for a disabled client under age sixty-five established on or after August 11, 1993.
  5. WAC 182-516-0125 Irrevocable pooled self-settled trusts for a disabled client established on or after August 11, 1993.
  6. WAC 182-516-0130 Irrevocable self-settled trusts established on or after August 11, 1993.
  7. WAC 182-516-0135 Self-settled trusts established before August 11, 1993.
  8. WAC 182-516-0140 Third-party trusts.
  9. WAC 182-516-0145 Trusts containing both assets of the beneficiary and third-party assets.

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

The new trust WACs are ordered in a somewhat logical way. First, there is a WAC that contains rules applicable to all trusts. Next, trust rules are broken down into whether the beneficiary is the grantor (self-settled trust) or not (third party trust).

There is a rule for self-settled revocable trusts, then rules for self-settled irrevocable trusts.

Irrevocable trusts are split into two categories – those that are excluded for Medicaid, and those that are not excluded for Medicaid.

After the self-settled trust rules, there are rules for third party trusts and trusts that contain both self-settled and third party assets.

WAC 182-516-0105 General rules that apply to all trusts.

Effective March 2, 2018

  1. Regardless of treatment under this chapter, all trusts remain subject to Title 182 WAC, which include income and resource rules under chapter 182-512 WAC and asset transfer rules under WAC 182-513-1363, un­less specified otherwise.
  2. The medicaid agency or the agency's designee treats the trust or a distribution from the trust as a third-party resource under WAC 182-501-0200 if:
    1. The agency or the agency's designee determines the trust is not an available resource or determines the distributions from a trust are not income; and
    2. The terms of the trust or how the trust is being administered meet the third-party resource rules under WAC 182-501-0200.
  3. The agency or the agency's designee applies the rules under WAC 182-516-0100 to both the language of the trust and how the trust is being administered.
  4. Assets in a trust are available resources to the beneficiary if the beneficiary:
    1. Is a trustee; or
    2. Can direct the use of the trust principal or income, or di­ rect the trustee's use of trust principal or income, for that benefi­ciary's support and maintenance under the terms of the trust.
  5. Cash distributions from a trust to the beneficiary are un­ earned income to the beneficiary in the month they are received or should have been received under the trust's terms.
  6. For asset transfer dates for trusts, the transfer date of an asset under WAC 182-513-1363 is the latest of:
    1. The date the trust was established;
    2. The date the asset being evaluated was transferred into the trust; or
    3. The date access to the asset was foreclosed by any action, inaction, or language in the trust, which prevents the beneficiary from accessing the asset.
  7. A client who is denied or terminated from medicaid due to the application of any rules under WAC 182-516-0100 may apply for a hard­ship waiver under WAC 182-513-1367.

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

Although there are WACs specific to trusts, this does not mean all nontrust WACs do not apply to trusts (for example: income, resource, third-party resources, transfers, etc.) Only when a trust specifically states a different rule does that trust rule control. For example, if a trust is determined to be an “available resource” under the trust rules, then the availability rules under chapter 182-512 WAC (the 20-day convert to cash rules) do not apply.

Both the language of the trust and the actual use of the trust matter.

Example: If a trust states the beneficiary cannot receive cash disbursements, but the trustee disburses cash to the beneficiary, we will assume the trustee can always disburse cash. Likewise, if a trustee has no discretion and must pay for a beneficiaries medical expenses, but the trustee states that they will not, we will assume they can.

If the beneficiary is also a trustee or co-trustee, or otherwise has control over the assets in the trust, we will assume the beneficiary can use the trust however they want, regardless of the trust language; therefore, it is an available resource.

The hardship waiver WAC 182-513-1367 was amended to include hardship waiver requests for adverse actions because of a trust.

WAC 182-516-0135 Self-settled trusts established before August 11, 1993.

Effective March 2, 2018

  1. A revocable or irrevocable self-settled trust established before August 11, 1993, under this section is one:
    1. Established other than by will by a beneficiary or that bene­ficiary's spouse;
    2. Under which that beneficiary may be the beneficiary of all or part of the payments from the trust; and
    3. Under which the distribution of those payments is determined by one or more trustees who are permitted to exercise any discretion with respect to the distribution to the beneficiary.
  2. For trusts established under subsection (1) of this section, the maximum value the trustee may distribute, under any circumstances, to the beneficiary is unearned income.
  3. If a trust does not meet subsection (1)(c) of this section:
    1. The trust is an available resource to the extent that trust assets can be used for the beneficiary; and
    2. Any asset that cannot be used for the beneficiary is an un­ compensated asset transfer.
  4. This section does not apply to any trust or initial trust de­cree established before April 7, 1986, for the sole benefit of an intellectually disabled client who resides in an intermediate care fa­cility for the intellectually disabled.

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

These trusts are referred to as “Medicaid qualifying trusts,” in the sense that these trusts restrict access to Medicaid (not make someone able to qualify for Medicaid).

Clarifying Information

Because the assets in a third party trust did not belong to the beneficiary before being placed in the trust, these trust generally do not affect Medicaid eligibility. That is unless the beneficiary has some control over the trust, or the beneficiary is able to remove assets from the trust. Or, in rarer circumstances, the trust is meant to supplant Medicaid or prevent the need for Medicaid entirely.

A critical, yet sometimes misunderstood, distinction for testamentary trusts: the estate of a late spouse who establishes a trust for the surviving spouse always establishes a third party trust. But only with the late spouse’s share of the community property. A late spouse cannot bequeath more than they own of the community property. Additionally, only assets that went through probate are third party – you will need to review assets that did not go through probate (such as life insurance, annuities, or retirement accounts).

Worker Responsibilities

Notifying the Office of Financial Recovery (OFR)

Notify Ken Washington of OFR via a Barcode tickler when any trust is imaged in the electronic case record. Set up the following DMS tickler:

  • Document type for tickler: TD
  • Subject: Trust
  • Site: 101
  • User: WAKE
  • Ready date: Default date is fine

Make sure the trust is indicated on the appropriate person’s resource screen in ACES. Add in the remarks that OFR has been notified of the trust in the ECR.

Trust Table Summary

The following table is a summary of treatment of trusts for Medicaid. Trust rules are the authority and this table should only be used as a guide. Be sure to look at the specific rule in question in addition to this table.

The table assumes the beneficiary and grantor are not the same person and the beneficiary has no control over the trust.

Trust type  Grantor Beneficiary Available resource Income Asset transfer
Third party Not beneficiary Client No Only disbursements to beneficiary No

Third party

Client

Not client No No Review 182-513-1363

Revocable trust on or after 8/11/93

Client, spouse or both

Client

Yes - anything not excluded under chapter 182-512 WAC.  Home exclusion does not apply if client is institutionalized

Yes - any payment or benefit from the trust

No

Revocable trust before 8/11/93

Client, spouse, or both

Client, spouse, or both

Yes - largest amount allowed by the trust's terms

Yes - amount allowed by trust's terms

Yes - assets that are not available by trust's terms

d4A irrevocable trust

Client

Client

No

Only disbursements to beneficiary

Only transfers to the trust after beneficiary turns age 65

d4C

Client

Client

No

Only disbursements to beneficiary

Only transfers to the trust after beneficiary turns age 65
Irrevocable trust on or after 8/1/03 Client, spouse, or both Client, spouse, or both Yes - any assets that can be used for the beneficiary Yes - any assets used to or for the benefit of the beneficiary Only assets that cannot be used for the beneficiary (rare) or assets that were actually not used for the beneficiary
Irrevocable trust on or after 8/11/93, but before 8/1/03 Client Client Yes - any assets that can be used for the beneficiary Yes - any assets used to or for the benefit of the beneficiary Only assets that cannot be used for the beneficiary (rare) or assets that were actually not used for the beneficiary
Irrevocable trust before 8/11/93 Client, spouse, or both Client, spouse, or both Yes - largest amount allowed by the trust's terms Yes - amount allowed by trust's terms Yes - assets that are not available by trust's terms
Any trust established before 4/7/86 for a client with intellectual disabilities who resides in an ICF/ID Client Client No Only disbursements to beneficiary No

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