by Thomas D. Begley, Jr., CELA
There are four main issues to be considered in drafting any trust involving a potential Medicaid recipient. These include:
Let’s examine each of these issues in the context of a DASNT.
Availability. The assets in the DASNT would not be available, because the trust would be designed to give the trustee complete discretion with respect to distributions. Standard Third-Party Special Needs Trust language would be used in designing the trust. The standard DAT language would also be included. Because of the special needs provisions, the assets in the trust are not counted as assets of the beneficiary.
Transfer of Asset Penalty. There would be no transfer of asset penalty imposed upon the grantor, usually a parent or grandparent, by SSI and Medicaid, because there is a statutory exemption[1] from the penalties for transfers of assets to or for the sole benefit of individuals with disabilities. For a child with a disability, there is no age limit. If the beneficiary of the DASNT is an individual other than a child, there is an age limit of 65.
Payback. Whether a “sole benefit of” trust is subject to a Medicaid payback is open to question. New Jersey takes the position that such a trust must include a Medicaid payback and this issue has not been litigated.
Tax Considerations
[1] 42 U.S.C. §1396p(c)(2)(B).
The post CONSIDERATIONS IN DRAFTING A DISABILITY ANNUITY SPECIAL NEEDS TRUST first appeared on SEONewsWire.net.]]>by Thomas D. Begley, Jr., CELA
Types of Trusts. Trusts established and funded after August 10, 1993, are governed by OBRA-93. The Medicaid-qualifying trust rules were repealed by OBRA-93, and new rules for revocable and irrevocable trusts created after August 10, 1993, were established. OBRA-93 also created special disability trusts, each of which has rules. These trusts include Self-Settled Special Needs Trusts and Pooled Trusts. OBRA-93 also established a Miller Trust, to be used when a potential Medicaid recipient has income in excess of the income cap. The fourth trust authorized under OBRA-93 is a sole benefit of trust.
The commonly-used trusts in Medicaid Planning include the following:
What Constitutes a Transfer. The key to understanding the transfer rules pertaining to trusts is to understand when the transfer has taken place. If there is a transfer from an individual then to a trust under conditions by which the trust assets are still available to the individual, for Medicaid purposes there has been no transfer. Therefore, where the trust is revocable, the assets are still available to the individual after the trust is funded so there is no transfer at this point. The transfer is considered to have taken place on the date of payment from the trust to a third party.
If the trust is irrevocable, the transfer is considered to have been made as of the date the trust was established and funded, or upon such later date that payment to the settlor was foreclosed. However, if the settlor can still benefit from the assets with which the trust is funded, those assets are still available so there is no transfer. If and when those assets are paid out to a third party, the transfer occurs. If the settlor places assets in an irrevocable trust and can no longer benefit from any of the trust corpus, there has been a transfer of assets when the trust is funded.[1]
Drafting Considerations for Trusts. There are seven main issues to be considered in drafting any trust involving a potential Medicaid recipient. These considerations are:
[1] 42 U.S.C. § 1396p(c)(1)(B); HCFA Transmittal 64 § 3258.4E.
The post OVERVIEW OF MEDICAID TRUSTS first appeared on SEONewsWire.net.]]>