New Social Security Rules On Trusts
GRANTOR TRUSTS
The POMS is divided into two sections: trusts established before January 1, 2000 and trusts established after January 1, 2000 when the Foster Care Independence Act of 1999 became effective.
Disability and pooled trusts are exceptions to the general rule and appear in the post January 1, 2000 section.
The general rule is that grantor trusts are countable resources unless they meet the Medicaid trust exception rules found in Section 203.
A "grantor" is any person who provides funding to the trust regardless of whether their name appears as grantor or settlor in the trust instrument. Section 200.B.2.
An "asset" is "any income or resource of the individual". Section 201.B.2. It does not include income excluded under POMS SI 00830.99 and 820.500 or resources excluded under POMS SI 01130.050. It counts payments to which the individual is legally entitled but does not receive because of that individual's action or action of another including a court. For instance, once cannot disclaim an inheritance in order to avoid these rules.
TRANSFER RULES. Under the post 2000 rules, a trust will be considered a resource unless there does not exist "any circumstances" in which the grantor could receive a trust distribution. The "any circumstances" test will not be covered in these materials.
MEDICAID EXCEPTION TRUSTS
APPLICATION. The POMS rules apply to trusts established under 42 U.S.C. §1396p(d)(4)(A) and (C). In Colorado, the citations to the State statute may be found at C.R.S. §15-14-412.8 and 412.9. Under all trusts, the individual must be disabled under Social Security criteria.
THE DISABILITY OR SPECIAL NEEDS TRUST
SSA uses the phrase "special needs trust". Colorado Medicaid uses the term "disability trust". The two terms are synonymous.
LEGAL REQUIREMENTS.
Contains "assets" of the individual.
Must be under 65 at trust creation.
Must be established by a parent, grandparent, guardian or a court for the benefit of the disabled individual.
State Medicaid must receive all amounts remaining in the trust on the death of the individual up to the amount paid under the State Medicaid Plan.
TRUST ADDITIONS. Irrevocable assignments made to the trust before age 65 that became effective after age 65 (e.g. structured annuity) may still be made to the trust. Section 203.B.1.c.
SOLE BENEFIT REQUIREMENT. Trust cannot be for the benefit of any other person other than the disabled individual and cannot be terminated prior to the death of the individual except for repayment to the State or to a creditor for payment for goods and services. Payments for goods and services to third parties are permissible. Section 203.B.1.e.
ESTABLISHED BY PARENTS. Parents can now create "seed trusts" whereby they fund a trust in a nominal amount and their competent child can then transfer his or her own assets into the trust. Section 203.B.1.f.
ESTABLISHED BY COURT. Court must establish trust and cannot merely ratify it. Section 203.B.1.f.
NON ESTABLISHMENT OF TRUST. Parents cannot establish trusts with assets over which they have no authority. Powers of Attorney are not effective. Section 203.B.1.g.
STATE PAYBACK. Must use language similar to that used in Section 203.B.1.h.
Next: Pooled Trusts and Distribution Rules
Eliminate your confusion about this intimidating subject! Solem Law is a Denver law firm, specializing in rights for the elderly and disabled. Some of their expertise includes disability and special needs trusts, estate planning, guardianship, long term care, and medicaid settlement services & medicare.
The POMS is divided into two sections: trusts established before January 1, 2000 and trusts established after January 1, 2000 when the Foster Care Independence Act of 1999 became effective.
Disability and pooled trusts are exceptions to the general rule and appear in the post January 1, 2000 section.
The general rule is that grantor trusts are countable resources unless they meet the Medicaid trust exception rules found in Section 203.
A "grantor" is any person who provides funding to the trust regardless of whether their name appears as grantor or settlor in the trust instrument. Section 200.B.2.
An "asset" is "any income or resource of the individual". Section 201.B.2. It does not include income excluded under POMS SI 00830.99 and 820.500 or resources excluded under POMS SI 01130.050. It counts payments to which the individual is legally entitled but does not receive because of that individual's action or action of another including a court. For instance, once cannot disclaim an inheritance in order to avoid these rules.
TRANSFER RULES. Under the post 2000 rules, a trust will be considered a resource unless there does not exist "any circumstances" in which the grantor could receive a trust distribution. The "any circumstances" test will not be covered in these materials.
MEDICAID EXCEPTION TRUSTS
APPLICATION. The POMS rules apply to trusts established under 42 U.S.C. §1396p(d)(4)(A) and (C). In Colorado, the citations to the State statute may be found at C.R.S. §15-14-412.8 and 412.9. Under all trusts, the individual must be disabled under Social Security criteria.
THE DISABILITY OR SPECIAL NEEDS TRUST
SSA uses the phrase "special needs trust". Colorado Medicaid uses the term "disability trust". The two terms are synonymous.
LEGAL REQUIREMENTS.
Contains "assets" of the individual.
Must be under 65 at trust creation.
Must be established by a parent, grandparent, guardian or a court for the benefit of the disabled individual.
State Medicaid must receive all amounts remaining in the trust on the death of the individual up to the amount paid under the State Medicaid Plan.
TRUST ADDITIONS. Irrevocable assignments made to the trust before age 65 that became effective after age 65 (e.g. structured annuity) may still be made to the trust. Section 203.B.1.c.
SOLE BENEFIT REQUIREMENT. Trust cannot be for the benefit of any other person other than the disabled individual and cannot be terminated prior to the death of the individual except for repayment to the State or to a creditor for payment for goods and services. Payments for goods and services to third parties are permissible. Section 203.B.1.e.
ESTABLISHED BY PARENTS. Parents can now create "seed trusts" whereby they fund a trust in a nominal amount and their competent child can then transfer his or her own assets into the trust. Section 203.B.1.f.
ESTABLISHED BY COURT. Court must establish trust and cannot merely ratify it. Section 203.B.1.f.
NON ESTABLISHMENT OF TRUST. Parents cannot establish trusts with assets over which they have no authority. Powers of Attorney are not effective. Section 203.B.1.g.
STATE PAYBACK. Must use language similar to that used in Section 203.B.1.h.
Next: Pooled Trusts and Distribution Rules
Eliminate your confusion about this intimidating subject! Solem Law is a Denver law firm, specializing in rights for the elderly and disabled. Some of their expertise includes disability and special needs trusts, estate planning, guardianship, long term care, and medicaid settlement services & medicare.
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