Revision 18-1; Effective March 1, 2018

 

The trusts covered in this section are:

  • Testamentary and Inter Vivos Trusts
  • Medicaid-Qualifying Trust
  • Trusts (Aug. 11, 1993, and After)
  • Revocable Trusts
  • Irrevocable
  • Exception Trusts
  • Qualified Income Trust (QIT)

 

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 Section F-6200, Medicaid-Qualifying Trust, and Section 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 Section 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.

 

F-6200 Medicaid-Qualifying Trust

Revision 09-4; Effective December 1, 2009

 

A Medicaid-qualifying trust (MQT) is one that the person, his spouse, guardian or anyone holding his power of attorney establishes using the person's money. The person is the beneficiary of a Medicaid-qualifying trust. A Medicaid-qualifying trust is one that was established between June 1, 1986, and Aug. 10, 1993. Trusts which meet the MQT definition and were established prior to June 1, 1986, are treated as standard inter vivos trusts.

Note: Public Law 103-66 (OBRA '93) revised policy for trusts established using the person's money on or after Aug. 11, 1993.

For Medicaid-qualifying trusts established before that date, continue using the policy in this section. If provisions for a change in the trust were included in the document before Aug. 11, 1993, use the policy governing Medicaid-qualifying trusts for the change. If the trust was amended on or after Aug. 11, 1993, apply the policy in Section F-6300, Trusts (Aug. 11, 1993, and After).

Public Law 99-272 states that distributions from Medicaid-qualifying trusts are considered available to the person whether or not distributions are actually made. The amount available is the maximum amount the trustee could disburse if he used his full discretion under terms of the trust. If distribution is not made, the maximum amount the trustee may distribute if he used his full discretion under terms of the trust is considered an available resource. If trusts do not specify an amount for distribution, and if the trustee has access to and use of the principal or the income from the trust, then the entire amount is considered an available resource that may be used for the person's benefit.

Examples:

  • The trustee has the discretion to distribute the corpus of the trust, which is property worth $6,000. The corpus, therefore, is a $6,000 countable resource.
  • The person established an irrevocable Medicaid-qualifying trust before Aug. 11, 1993. The trustee has discretion only to distribute $100 monthly from the income earned by the trust but chooses not to do so. The corpus is not a countable resource; however, the person's other countable resources are increased by $100 every month. If necessary, schedule a special review to monitor eligibility.

 

F-6210 Zebley Cases

Revision 09-4; Effective December 1, 2009

 

A Medicaid-qualifying trust established for a minor child using the lump sum payment received in settlement of Zebley vs. Sullivan is excluded from all consideration of eligibility under undue hardship provisions. Undue hardship exists because the person would otherwise be forced to spend the settlement funds on services now covered by Medicaid when the funds will be needed once the person reaches majority. A trust established using Zebley settlement funds is excluded under undue hardship policy, even when the trust is set up on or after Aug. 11, 1993.

Zebley funds may be used to establish pooled trusts detailed in Section F-6700, Exception Trusts.

 

F-6300 Trusts (Aug. 11, 1993, and After)

Revision 09-4; Effective December 1, 2009

 

The Omnibus Budget Reconciliation Act of 1993 (P.L. 103-66) revised policy concerning trusts established on or after Aug. 11, 1993, using the person's assets. The trust provisions apply to all MEPD applicants/recipients, whether in an institutionalized setting or not. However, the penalty period for transfers of assets into irrevocable trusts applies only to a person in an institutional setting.

A trust includes any legal instrument, device or arrangement which may not be called a trust under state law, but which is similar to a trust. That is, it involves a grantor who transfers property to an individual or entity with fiduciary obligations with the intention that it be held, managed or administered by the individual or entity for the benefit of the grantor or others. This can include (but is not limited to) escrow accounts, investment accounts, pension funds, irrevocable burial trusts, limited partnerships and other similar entities managed by an individual or entity with the fiduciary obligations.

Note: A legal review of the instrument, device or arrangement that establishes the trust 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. See Appendix XVI, Documentation and Verification Guide.

The characteristics of the trust include the following:

  • The trust was established on or after Aug. 11, 1993.
  • The person's assets were used to form all or part of the corpus of the trust. The policy in this section does not apply to trusts established by a will in which the person is the beneficiary.
  • The trust was established by:
    • the person;
    • the person's spouse;
    • any person, including a court or administrative body, with legal authority to act on behalf of or in place of the person or person's spouse; or
    • any person, including a court or administrative body, acting upon the direction or the request of the person or the person's spouse.

If the person's assets comprise only part of the corpus, the trust policies apply to that portion of corpus consisting of the person's former assets.

Example: The person established a trust on Aug. 15, 1993, with a corpus of $20,000. The person contributed $8,000 to the corpus and her adult children contributed $12,000. The trust policies apply to the $8,000 placed by the person into trust.

 

F-6310 Limited Partnerships

Revision 12-2; Effective June 1, 2012

 

A limited partnership is an investment arrangement often used as an estate-planning device. A limited partnership must be filed with the Secretary of State. There are general partners and limited partners. General partners manage and make all decisions pertaining to the partnership. Limited partners own a percentage of the partnership, but they are not active partners and have no voice in management. The ownership interest held by limited partners is not business property, but represents only an investment, much like stock shares in any corporation. As investors, they receive a share of the profits and losses. A "family limited partnership" is simply one that is restricted to family members.

A limited partnership is "similar legal device" to a trust.

Trust provisions of the Omnibus Budget Reconciliation Act of 1993 direct that the term "trust" includes any legal device similar to a trust.

The general partners act as trustee, and the limited partners are the equivalent of beneficiaries of an irrevocable trust. To the extent that the general partners can make each limited partner's ownership interest available to him, that interest is a countable resource and not a transfer of assets. However, a transfer of assets has occurred to the extent that:

  • The value of the share of ownership purchased by the limited partner is less than the amount he invested.

    Example: The individual originally owned 100% of the assets comprising the partnership. This 100% interest is exchanged for a 95% interest in the partnership. This represents a transfer of 5% of those assets.
  • The general partners cannot make the limited partner's share available to him.

    Example: The limited partnership imposes restrictions on the sale of its property or the individual's interest in the partnership. A transfer of assets has occurred to the extent that the individual's right to sell his interest is restricted.

If transfer-of-assets provisions apply, the look-back period is 60 months.

Limited partnership agreements should be referred to the regional attorney. Medicaid eligibility specialists apply the appropriate policy based on the regional attorney's evaluation of the terms of the agreement.

See Chapter E, General Income, for treatment of income.

 

F-6400 Revocable Trusts

Revision 09-4; Effective December 1, 2009

 

A legal review of the instrument, device or arrangement that establishes the trust 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. See Appendix XVI, Documentation and Verification Guide.

The corpus is an available resource.

Example: On Aug. 11, 1993, the person transferred $50,000 into a revocable trust. Terms of the trust do not permit the trustee to pay any portion of the corpus to or for the benefit of the person, but the person can revoke the trust. Since the trust is revocable, the entire $50,000 corpus is a countable resource.

Payments from the corpus or income generated by the corpus, to or for the benefit of the person, excluding payments for medical/social services, are income.

Payments from the corpus or income generated by the corpus for any other purpose are a transfer of assets.

Examples:

  • A withdrawal from a trust account that is given to the person's brother is a transfer of assets.
  • A withdrawal from a trust account that is given to a spouse does not incur a transfer of assets penalty because interspousal transfers are permitted.

When the home is in an irrevocable or revocable trust ("Living Trust"), see Section F-3300, The Home as a Countable Resource.

 

F-6500 Irrevocable Trusts

Revision 09-4; Effective December 1, 2009

 

A legal review of the instrument, device or arrangement that establishes the trust 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. See Appendix XVI, Documentation and Verification Guide.

If there are any circumstances under which payment from an irrevocable trust could be made to or for the benefit of the person, then:

  • the portion of the corpus, or income generated by the corpus, from which payment could be made is a countable resource;
  • payments made to or for the benefit of the person, except medical and social services, are countable income; and
  • payments for any other purpose are a transfer of assets.

Although termed irrevocable, a trust which provides that the trust can only be modified or terminated by a court is a revocable trust because the person or his responsible party can petition the court to amend or terminate the trust.

Although termed irrevocable, a trust that will terminate if a certain circumstance occurs during the lifetime of the person, such as the person leaving the nursing facility and returning home, is a revocable trust.

If there are no circumstances under which payments from some portion or all of an irrevocable trust, or income generated by the trust, could be made available to a person, then the corpus, or portion of the corpus, and the generated income are considered a transfer of assets.

The date of transfer is the date the trust was established, or if terms of the trust foreclose payment to the person at a later date, the date payment is foreclosed to the person. The value of the trust, for calculating the penalty period, includes any payments made from the trust for whatever purpose after the date the trust was established or, if later, the date payment to the person was foreclosed. If funds were added to that portion of the trust after these dates, including interest earned by the trust, the addition of those funds is considered to be a new transfer of assets, effective on the date the funds are added to the trust. Thus, in treating portions of a trust which cannot be paid to a person, the value of the transferred amount is no less than its value on the date of establishment or foreclosure, and may be greater if funds were added to the trust after that date.

 

F-6600 Treatment of Trusts

Revision 09-4; Effective December 1, 2009

 

A legal review of the instrument, device or arrangement that establishes the trust is required. 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. See Appendix XVI, Documentation and Verification Guide.

The following policy applies to trusts without regard to:

  • the purpose for which the trust is established;
  • whether the trustee, or similar person or entity, has or exercises any discretion under the trust;
  • any restrictions on when or whether distributions can be made from the trust; or
  • any restrictions on the use of distributions from the trust.

This means that any trust which meets the basic requirements outlined in previous sections can be counted in determining eligibility for Medicaid. No clause or requirement in the trust, no matter how specifically it applies to Medicaid, or other federal or state programs (that is, an exculpatory clause), precludes a trust from being considered under the rules of this section. While exculpatory clauses, use clauses, trustee discretion or restrictions on distributions do not affect a trust's countability, they do have an impact on how the various components of specific trusts are treated.

 

F-6610 Payments from a Trust

Revision 09-4; Effective December 1, 2009

 

A legal review of the instrument, device or arrangement that establishes the trust 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. See Appendix XVI, Documentation and Verification Guide.

Payments to or on behalf of the person:

Payments are considered to be made to the person when any amount from the trust, including an amount from the corpus or income produced by the corpus, is paid directly to the person, or to someone acting on his behalf, such as a guardian or legal representative.

Payments made for the benefit of the person are payments of any sort, including an amount from the corpus or income produced by the corpus, paid to another entity so that the person derives some benefit from the payment. For example, such payments could include purchase of clothing or other items, such as a radio or television for the person. Such payments could also include payment for services the person may require, or care, whether medical or personal, that the person may need. Payments to maintain a home would also be payments for the benefit of the person.

A payment to or for the benefit of the person is counted under trust provisions only if such a payment is ordinarily counted as income. For example, payments made on behalf of a person for medical care are not counted in determining income eligibility. Thus, such payments are not counted as income under the trust provision.

Circumstances under which payments can or cannot be made:

In determining whether payments can or cannot be made from a trust, any restrictions on payments, such as use restrictions, exculpatory clauses or limits on trustee discretion that may be included in the trust, must be considered.

Example: If the trust provides that the trustee can disburse only $1,000 out of a $20,000 trust, only the $1,000 would be treated as a payment (disbursement) that could be made. The remaining $19,000 would be treated as an amount that cannot, under any circumstances, be paid to or for the benefit of the person.

When a trust provides, in some manner, that a payment (disbursement) can be made, even though that payment (disbursement) may be sometime in the future, the trust is treated as providing that the payment (disbursement) can be made from the trust.

Example: If a trust contains $50,000 that the trustee can pay to the person only in the event that the person needs, for example, a heart transplant, the full amount would be considered as payment (disbursement) that could be made under some circumstances, even though the likelihood of payment (disbursement) is remote.

 

F-6700 Exception Trusts

Revision 09-4; Effective December 1, 2009

 

A legal review of the instrument, device or arrangement that establishes the trust 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. See Appendix XVI, Documentation and Verification Guide.

The Omnibus Budget Reconciliation Act of 1993 identifies several types of trusts which are exceptions to the trust provisions stated in Section F-6300, Trusts (Aug. 11, 1993, and After). These exceptions apply only to trusts established on or after Aug. 11, 1993.

 

F-6710 Special Needs Trust

Revision 17-2; Effective June 1, 2017

 

A legal review of the instrument, device or arrangement that establishes the trust 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. See Appendix XVI, Documentation and Verification Guide.

Special needs trust:

A special needs trust is a revocable or irrevocable trust established with the assets of a person under age 65 who meets the SSI program's disability criteria. The trust must be established for the person’s benefit by a parent, grandparent, legal guardian, a court or self. Beginning December 13, 2016, people under age 65 who meet the SSI program's disability criteria may establish a special needs trust for their own benefit. The trust must include a provision that the state is designated as the residuary beneficiary to receive, at the person's death, funds remaining in the trust equal to the total amount of Medicaid paid on their behalf.

Use Form H1210, Subrogation (Trusts/Annuities/Court Settlements), to report to the Provider Claims Payment Section any potential paybacks to the state as the residuary beneficiary of special needs trusts.

This trust exception continues even after a person becomes age 65 if the individual continues to meet the disability criteria for the SSI program. However, additions or augmentations to the trust after the person becomes age 65 are a transfer of assets.

If a person currently is receiving disability benefits from SSI, RSDI or Railroad Retirement (RR), their disability is automatically established. Verify that the SSI, RSDI or RR benefit is a disability benefit. Otherwise, disability must be established.

 

F-6711 Treatment as Resource

Revision 09-4; Effective December 1, 2009

 

The trust is not counted as a resource.

 

F-6712 Treatment as Income

Revision 18-1; Effective March 1, 2018

 

Any distribution paid directly from a trust to the individual or to a third party for the benefit of the individual is unearned income to the individual in the month of receipt, except:

  • payments for medical or social services for the trust beneficiary (Section E-1000, General Income, for an explanation of medical and social services); and
  • payments to the trust beneficiary’s Achieving a Better Life Experience account (Section E-3331.4, Treatment of Interest and Dividends Earned on an Achieving a Better Life Experience (ABLE) Account).

A payment to or for the benefit of the individual is counted under trust provisions only if such payment is ordinarily counted as income.

 

F-6713 Transfer of Assets

Revision 09-4; Effective December 1, 2009

 

Transfer-of-assets provisions do not apply when such a trust is established. However, if assets are transferred to another party from the corpus or income generated by the corpus, then the policy in Chapter I, Transfer of Assets, applies.

 

F-6720 Pooled Trust

Revision 09-4; Effective December 1, 2009

 

A legal review of the instrument, device or arrangement that establishes the trust 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. See Appendix XVI, Documentation and Verification Guide.

Pooled trust:

Note: Zebley funds may be used to establish pooled trusts.

A pooled trust is a revocable or irrevocable trust containing the assets of a person who meets SSI's definition of disability and which satisfies the following conditions:

  • It was established and is managed by a non-profit association.
  • A separate account is maintained for each beneficiary but, for investment and management purposes, the accounts may be pooled.
  • Accounts in the trust are established solely for the benefit of persons who meet SSI's disability criteria, and the trusts are established by a parent, grandparent or legal guardian of such individuals by a court, or by the disabled individuals themselves.
  • The trust must include a provision that, to the extent that amounts remaining in a person's account at his death are not retained by the trust, the state is reimbursed in an amount equal to the total amount Medicaid paid on the person's behalf.

Note: Use Form H1210 to report to the Provider Claims Payment Section any potential paybacks to the state as the residuary beneficiary of pooled trusts.

Examples of pooled trusts are:

  • The ARC of Texas Master Pooled Trust, established in 1997.
  • Declaration of Trust for the Travis County Master Trust; Founders Trust Company, Trustee, adopted by decree of the District Court of Travis County, Texas, 201st Judicial District, effective Aug. 1, 1993.
  • Declaration of Trust for Children for Whom the Texas Department of Protective and Regulatory Services is Managing Conservator or Who Are or Have Been Under its Jurisdiction; Boatmen's National Bank of Austin, Trustee, adopted by decree of the District Court of Travis County, Texas, 98th Judicial District, effective June 1, 1993.

 

F-6721 Treatment as Resource

Revision 09-4; Effective December 1, 2009

 

The trust is not counted as a resource.

 

F-6722 Treatment as Income

Revision 18-1; Effective March 1, 2018

 

Any distribution to or for the benefit of the person from corpus or income generated by the trust is countable income, except the following distributions:

  • payments for medical or social services (See Section E-1000, General Income, for an explanation of medical and social services); and
  • payments to an Achieving a Better Life Experience account (E-3331.4, Treatment of Interest and Dividends Earned on an Achieving a Better Life Experience (ABLE) Account.).

A payment to or for the benefit of the person is counted under trust provisions only if such payment is ordinarily counted as income.

 

F-6723 Transfer of Assets

Revision 09-4; Effective December 1, 2009

 

Transfer-of-assets provisions do not apply when a pooled trust is established for the benefit of a person under age 65. If the person is age 65 or older, or if the person's portion of the assets in the trust are transferred to another party, then the policy in Chapter I, Transfer of Assets, applies.

 

F-6800 Qualified Income Trust (QIT)

Revision 16-4; Effective December 1, 2016

 

When an applicant is income ineligible in an institutional setting, see Section B-2500, Explaining Policy vs. Giving Advice, to determine the appropriate actions to take and the actions to avoid. See Appendix XXXVI, Qualified Income Trusts (QITs) and Medicaid for the Elderly and People with Disabilities (MEPD), for more information concerning a QIT and a sample QIT document.

Although the use of a QIT can overcome the special income limit for MEPD eligibility for institutional or Home and Community-Based Services waiver programs, it is not available to individuals in Community Attendant Services (CAS) who are income ineligible.

If a QIT is received, a legal review of the instrument, device, or arrangement that establishes the trust 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 QIT documents to the regional attorney for review. See Appendix XVI, Documentation and Verification Guide.

Qualified income trust (QIT):

A QIT is an irrevocable trust established for the benefit of an individual and/or the individual's spouse, the corpus of which is composed only of the individual's income (including accumulated income). The trust must include a provision that the state is designated as the residuary beneficiary to receive, at the individual's death, funds remaining in the trust equal to the total amount of funds Medicaid paid on the individual's behalf. Use Form H1210, Subrogation (Trusts/Annuities/Court Settlements), to report to the Provider Holds and Recoupment Unit  any potential paybacks to the state as the residuary beneficiary of QITs.

The following lists the characteristics of a QIT.

  • The trust must be irrevocable.
  • The trust must contain only the individual's income.
    • If resources are placed in the trust, it is not a QIT.
    • Some banks may require nominal deposits, $10 to $20, to establish a financial account to fund the trust.
    • Nominal amounts of an individual's resources, or another party's funds, may be used to establish the account without invalidating the trust or being counted as gift income to the individual. Once the trust account is established, however, only the individual's income can be directed to the trust account.
  • The income does not have to be directly deposited into the trust.
  • The income for which the trust is established must be deposited into the trust during the month it is received by the individual. 
  • The trust may be established with any or all sources of an individual's income, but an entire income source must be deposited. For example, the trust may be established for an individual's private pension income, but not the individual's Social Security income. If the trust document indicates only half of the pension income must be deposited, it is not a valid QIT.

 

F-6810 Treatment as Resource

Revision 09-4; Effective December 1, 2009

 

The trust is not counted as a resource.

 

F-6820 Treatment as Income

Revision 16-4; Effective December 1, 2016

 

Income directed to the trust is disregarded from countable income when testing eligibility for institutional or Home and Community-Based Services (HCBS) waiver programs. Income must be directed to the trust account during the calendar month in which it is received. Any source of non-exempt/non-excludable income which is not directed to the QIT account during the calendar month of receipt is countable income for that month.

For the initial month that a QIT is established, a partial deposit of the income for which the trust is established will not invalidate the trust and the entire amount of the income source(s) will be disregarded from countable income for that month. An individual may have used some of the monthly income to pay expenses prior to the date the QIT is established so the entire source(s) may not be available to open the QIT account. If only a partial deposit is made in the initial month, prior to certification, staff must verify that the entire amount of the income source(s) for which the QIT is established is being deposited into the QIT account subsequent month or the QIT is considered invalidated.

If countable income exceeds the institutional income limit, the individual is income-ineligible for the month. Applicants may not be certified for any calendar month(s) in which they are income-ineligible. For active individuals, restitution is requested in the amount of the vendor payment for any calendar month(s) in which they are income-ineligible.

Notes:

  • When an individual does not pay a full month's co-payment due to hospitalization or because Medicare covered 100% of the cost of a partial month, the accumulated funds in the QIT trust are not a countable resource, and transfer of assets is not involved.
  • An individual receiving HCBS waiver services who establishes a QIT covering all waiver costs is not denied. In a waiver program, the applicant with a QIT is receiving the benefit of the contracted Medicaid rates for waiver services as opposed to the private rates.

Examples:

  • The applicant entered the nursing facility and applied for Medicaid in July. Income totals $3,600. The QIT calls for all income to be directed to the trust account. However, the trustee did not deposit the July income checks to the trust account until August 23. The entire $3,600 is countable income for July, and the applicant is ineligible for that month.
  • The individual was certified for Medicaid in September. The QIT calls for all income (totaling $3,600) to be directed to the trust account. During the redetermination in August of the following year, the eligibility specialist learns that income checks for June were not deposited to the trust account until July. Because the person was ineligible for June, the eligibility specialist requests restitution for that month in the amount of the vendor payment.

Income directed to the trust is not disregarded in determining eligibility for SSI or non-institutional medical assistance programs: Qualified Medicare Beneficiaries, Special Low-Income Medicare Beneficiaries, or Community Attendant Services.

Income paid from the trust for co-payment for institutional or Home and Community-Based Services waiver services or to purchase other medical services for the person is not countable income for eligibility purposes. Income paid from the trust directly to the person or otherwise spent for his benefit is countable income for eligibility purposes.

Examples of countable income include cash distributions directly to the individual and direct payments (disbursements) from the trust for the individual's hair salon services. These distributions do not invalidate the trust; however, they are countable income in the month of distribution. If countable income exceeds the institutional limit, the individual is income ineligible for that month. Eligibility specialists may not certify applicants for any month(s) in which they are income ineligible. For active individuals, the eligibility specialist requests restitution for any month(s) in which the individual was ineligible. The eligibility specialist must test for ongoing eligibility.

The individual cannot use income from the trust to purchase eligibility for any HCBS waiver program. If the trustee directs to the trust account different sources of income other than those identified in the QIT document, but the entire income source(s) is deposited and countable income remains within the institutional income limit, eligibility is not affected.

Example: The individual's income totals $3,600, consisting of $600 Social Security and $3,000 private pension. The QIT calls for all income to be directed to the trust account. At redetermination, the eligibility specialist learns that the trustee is directing only the private pension to the trust account. Since the individual's countable income totals $600, the individual remains income-eligible.

If the trust instrument requires that the income placed in the trust must be paid out of the trust for institutional or HCBS waiver services provided to the individual, there is no transfer of assets because the individual receives fair market value for the income that was placed into the trust. However, if there is no such requirement or the income is not used for the individual's care, transfer of assets provisions apply. The income must be paid out by the end of the month following the month funds were placed in the trust to avoid transfer provisions. Because transfer of assets is not imposed for transfers of assets between spouses, QIT provisions that allow payments to or for the benefit of the individual's spouse do not result in a transfer of assets penalty.

Institutional care co-payment and community-based care co-payment calculations are based on the individual's total income (income directed to the trust as well as income not directed to the trust), less the standard co-payment deductions. Costs of trust administration are not deducted in the co-payment calculation; however, legal and accounting fees necessary to maintain the trust can be paid from the trust without incurring a transfer penalty.

VA aid-and-attendance benefits, housebound allowances and reimbursements for unusual or continuing medical expenses are exempt from both eligibility and co-payment calculations. However, if an individual deposits these payments into a QIT account, they are countable for co-payment calculations. If an individual receives a VA pension that includes aid-and-attendance benefits, housebound allowances or reimbursements for unusual or continuing medical expenses, the individual may separate the aid-and-attendance benefits, household allowances or reimbursements for unusual or continuing medical expenses from the VA pension before depositing the VA pension into the QIT account. Aid-and-attendance benefits, housebound allowances or reimbursements for unusual or continuing medical expenses are not income for Medicaid eligibility determinations.

The income placed in a QIT will be disregarded for eligibility purposes for the first month that the individual has a valid signed trust and enough income is placed in the account to reduce the remaining income below the eligibility limit. For the initial month that a QIT is established, even if only a partial payment of the income for which the trust is established is deposited, the entire income source is disregarded for that month.

 

F-6900 Undue Hardship

Revision 09-4; Effective December 1, 2009

 

When application of the trust provisions would create an undue hardship, those provisions do not apply. Undue hardship exists when application of the trust provisions would deprive the person of medical care so that his health or his life would be endangered. Undue hardship also exists when application of the trust provisions would deprive the person of food, clothing, shelter or other necessities of life.

Undue hardship does not exist if a person is inconvenienced or must restrict his lifestyle, but is not at risk of serious deprivation. Undue hardship relates to hardship to the person, not relatives or responsible parties of the person.

Before requesting a waiver of the trust provisions on the grounds of undue hardship, the person must make reasonable efforts to recover assets placed in trust, such as petitioning the court to dissolve the trust. If a person claims undue hardship, HHSC must make a decision on the situation as soon as possible, but within 30 days of receipt of the request for a waiver of the trust policy. The person has the right to appeal an adverse decision on undue hardship.

Minimum case documentation includes a written statement explaining the person's or grantor's reasons for establishing the trust, why the person's needs cannot be met and why there is undue hardship for the person.

The supervisor must sign off on all undue hardship cases.