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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.