F-6100, Testamentary and Inter Vivos Trusts

Revision 09-4; Effective December 1, 2009

A trust acts as an "account" created to hold assets. For example, trusts may hold assets for minors or adults who have been determined to be incompetent. Trusts also may be used to hold and distribute assets in such a way as to reduce income or estate taxes.

A trust includes any legal instrument, device or arrangement that may not be called a trust under state law, but that is similar to a trust. The characteristics of all trusts are primarily the same.

Elements such as trustees, trustors, beneficiaries, funding of the trust and whether or not the trust is revocable mean the same thing in any trust.

Resource and income eligibility treatment of trusts are different based on the terms of the trust.

The trustee, also known as the grantee, can be anyone — spouse, guardian, a financial institution or an individual holding a power of attorney.

If the person is the trustee and has the legal right to use the trust for the person’s own benefit, then the trust is just like a bank account — all income and resources are available to that person.

A testamentary trust is established by will.

An inter vivos trust is established while the person creating the trust is still living.

There is a possibility that a person is a beneficiary of one of the above types of trusts when the person is a beneficiary of the trust, but his assets were not used to form the corpus of the trust.

Omnibus Budget Reconciliation Act (OBRA) of 1993 (Public Law 103-F-6F-6) made no changes in policy for testamentary and inter vivos trusts.

For trusts established using the person's assets, see F-6200, Medicaid-Qualifying Trust, and F-6300, Trusts (Aug. 11, 1993, and After).

Resources in a testamentary or inter vivos trust are countable if the person is the trustee and has the legal right to revoke the trust and use the money for his own benefit. If he does not have access to the trust, the trust is not counted as a resource. If a trust is not counted as a resource, payments (disbursements) from the trust made to or on behalf of the person are considered income (except payments [disbursements] used to purchase medical or social services for the person). If the person's access to a trust is restricted, that is, only the trustee (other than the person) or the court may withdraw the principal, then the value of the trust as a resource is not counted. This is true even if:

  • the legal guardian is the trustee;
  • the trust provides a regular, specified payment (disbursement) to the person; or
  • the trust provides for discretionary withdrawals by the trustee.

Verification for a Testamentary or Inter Vivos Trust

Request the following:

  • copy of the trust agreement;
  • copy of the will, if the trust is a testamentary trust; and
  • statement(s) from the financial institution, trust management company and attorney as to the following:
    • value of trust corpus (12:01 a.m. on the first day of the month(s)),
    • amount and frequency of income produced by the trust, and
    • amount of corpus and income available to the applicant/person.

Required Regional Legal Review and Documentation

A legal review of the trust document (or will) is necessary. Contact with regional legal staff is based on regionally established procedures. Check with your supervisor for regionally established procedures. Send a copy of the documents to the regional attorney for review. Ask the attorney to review the documents and determine if the trust:

  • is a testamentary or inter vivos trust;
  • is revocable or irrevocable;
  • was established by someone other than the person such as a spouse, parent, grandparent, etc.;
  • was established with someone else's money other than the person's money;
  • restricts the person's access; or
  • names the person as the trustee.

Resource Treatment

Based on the regional legal review, count the value of the corpus of the trust as an available resource if the:

  • trust is a testamentary or inter vivos trust;
  • trust is revocable; and
  • person is named as the trustee and can use the money for the person's own benefit.

Based on the regional legal review, do not count the value of the corpus of the trust as an available resource if the:

  • trust is a testamentary or inter vivos trust;
  • person is not the trustee of the trust; and
  • person's access to the trust is restricted — that is, only the trustee (other than the person) or the court may withdraw the principal.

In addition, the corpus of the trust is not counted as an available resource when the person is not the trustee, even if the:

  • legal guardian is the trustee;
  • trust provides a regular, specified payment/disbursement to the person; or
  • trust provides for discretionary withdrawals by the trustee.

See E-3312, Testamentary and Inter Vivos Trusts Payments.

See Appendix XVI, Documentation and Verification Guide.

Note: Contact the regional attorney for help interpreting legal documents.