E Special Treatment Trusts and ALTCS Eligibility

Policy

This section covers the following ALTCS policies for Special Treatment Trusts (STTs):

·        Disbursements;

·        How income is counted for Special Treatment Trusts;

·        Requirements for trustees;

·        Penalties for late reporting; and

·        Violations of Special Treatment Trust requirements.

1)    Disbursements

Disbursements can only be made for the benefit of the customer and for purposes listed in state law at ARS §36-2934.01.

NOTE      For household expenses or any other shared expense, only the customer’s proportionate share is an allowed disbursement. The total expense divided by the number of people who share the benefit of the expense equals the customer’s share.

The following table lists examples of allowed disbursements:

Disbursements that do not meet the requirements in ARS §36-2934.01 are not allowed.

Some examples of disbursements that are not allowed from an STT include:

·        Gifts, payments, or loans to or for the benefit of anyone other than the beneficiary, including reimbursements to third parties for the customer’s expenses;

·        Child support and alimony payments that are not garnished;

·        Paying all the shelter costs for a shared household;

·        Income taxes when there is no actual tax liability;

·        Vacation expenses for family members;

·        Payments on past debts, including paying down credit cards;

·        Health insurance premiums for other people; and

·        Burial funds that do not meet the requirements listed in the table above.

When non-allowed disbursements have been made, the trust may lose its entitlement to special treatment. The disbursements may also need to be reviewed as a transfer with uncompensated value (see Chapter 900 – Transfers).

2)    How Income is Counted for Special Treatment Trusts

Trust income and disbursements are counted as described in this section, regardless of the terms of the trust document.

The following table describes how income and disbursements are treated for income eligibility and for Share of Cost (SOC).

NOTE     For the ALTCS Income Test, the total countable income outside the trust plus the total countable disbursements from the trust may not exceed the ALTCS income limit.

For examples, see STTs and Income Calculations and STTs and SOC Calculations.

3)    Requirements for Trustees

The trustee of a STT has specific responsibilities related to providing proof and reporting changes. If the trustee fails or refuses to cooperate with these requirements, the trust can lose its special treatment status.

A trustee must:

·        Provide proof needed to determine if the trust qualifies as a STT;

·        Provide proof of disbursements and the related expenses;

·        Report changes in trust income or disbursements;

·        Report changes in trustees, as well as changes to an existing trustee’s phone number or address;

·        Report if the trust purchases real or personal property; and

·        Report when the trust is revoked or terminated.

Other trustee responsibilities depend on whether the trust is still in its initial review to see if it qualifies as a STT, or it has already been approved as a STT.

Initial Special Treatment Trust Review

The trustee must provide the following documents for the trust review:

·        The entire trust document;

·        Proof of trust assets and disbursements from the date the trust was created to the current month;

·        Proof of the source of the initial funding of the trust; and

·        The Acknowledgment of Responsibilities as Trustee for a Special Treatment Trust form (DE-522).

The trustee must also provide one of the following forms:

·        For trusts for individuals under age 65 with a disability or Pooled Trusts, the Special Treatment Trust Anticipated Disbursements (DE-312) form; or

·        The Income Only Trust Anticipated Disbursements (DE-313) form.

The Anticipated Disbursement forms are used to state what costs and expenses will be paid from the trust.

For IOTs, the SOC MUST be paid from the trust. When the SOC is greater than the total income assigned to the trust, the full amount of the income deposited to the trust must be disbursed for the SOC. The SOC disbursement cannot be reduced to allow for other trust expenses.

Reporting Changes

After the STT is approved, the trustee must report any new trust funding or changes to the planned disbursements listed on the DE-312 or DE-313 forms at least 45 days in advance.

See Disbursement Request Examples

When the trustee cannot report changes by this due date because of circumstances beyond his or her control, the trustee must report the change within 30 calendar days from the date of the change or emergency disbursement. However, the notice is still considered late. See section 4 below for penalties that may be applied.

A major change, such as the customer moving from an HCBS living arrangement to a nursing facility, may change the trust disbursements needed, especially with an IOT. When this happens, the trustee must provide trust account records and complete a new DE-312 or DE-313 form listing anticipated disbursements for the next 12 months.

Reporting Requirements at a Renewal

At renewal, the trustee must provide information and update forms as described in the table below:

Annual Accounting Statements Placed with the Court

Trustees of STTs with a large trust corpus (usually Trusts for Individuals Under Age 65 with a Disability) are sometimes required to file quarterly, semi-annual, or annual accounting statements with the court that approved the trust creation. 

4)    Penalties for Late Reporting

Changes to income or trust disbursements can result in the customer losing eligibility or paying an increased share of cost for one or more months. 

The trustee of an STT must report changes in income assigned to the trust or to disbursements from the trust at least 45 calendar days before the change happens. This is to allow enough time, if needed, to process any change in the SOC or eligibility for the month the change will happen. 

When the trustee reports these changes late, the change is reviewed to see if the SOC would have been higher, or eligibility would have been affected for past months. If so, the adverse action that would have been applied if the change had been reported on time is applied to the next month possible allowing for advance notice.

When an adverse action is taken to stop ALTCS eligibility or increase the customer’s SOC due to late reporting, the customer may appeal the decision. This may result in eligibility or SOC being continued at the previous level during the appeal. If the Agency decision is upheld at the hearing, the adverse action is applied for future months.

5)    Violations of Special Treatment Trust Requirements

Violating the terms or conditions of a STT can result in the trust losing its Special Treatment status. Actions that violate the terms of a STT include:

·        Depositing resources into an income-only trust;

·        Depositing income or resources belonging to someone other than the customer into the trust;

·        Breaches of “spendthrift” restrictions such as assigning, pledging, or otherwise obstructing the trust resources for certain personal debts or other obligations;

·        Issuing disbursements from the trust that are not for the benefit of the customer;

·        Giving false information about trust income or disbursements; and

·        Failing to cooperate with trust reporting or proof requirements.

When a violation has occurred and the trust is no longer entitled to special treatment, it is treated as either a revocable or irrevocable non-special treatment trust (see MA802), until the trustee corrects the violation.

NOTE      If counting the trust resources and income as available due to losing special treatment would cause an undue hardship, the situation is reviewed by the agency on a case-by-case basis.

Definitions

Proof

Proof of disbursements

·        Anticipated Disbursements form (DE-312 or DE-313) with all 12 months completed, signed by the trustee;

See Special Treatment Trust Anticipated Disbursements Form (DE-312) and Income-Only Trust Anticipated Disbursements Form (DE-313) for examples.

·        Check registers or other records of payments that were made from the trust. The records should show the payments date, amount paid, and what was received. Include explanations for changes made to the trust assets, such as accounts closed, properties sold, or titles changed;

·        Receipts, invoices, or billing statements for any legal or professional services to be disbursed from the trust;

·        Proof of health insurance premium amounts that will be paid from the trust;

·        Proof of any shelter expenses that will be paid from the trust;

·        For burial expenses, a quote or estimate from the burial provider showing the type of pre-need burial plan and costs, unless the request is for a life insurance policy or designated burial account of $1,500 or less; and

·        A written explanation of any planned medical expenses, payments to the trust beneficiary, entertainment, vocational, or transportation expense disbursements.

Proof of Trustee agreement to abide by the STT requirements

·        Acknowledgement of Responsibilities as Trustee for a Special Treatment Trust form (DE-522) signed by the trustee.

Legal Authority