When a counted resource or home property is placed in a trust, a transfer for less than fair market value is usually considered to have taken place. A person placing a resource in a trust generally gives up ownership of the resource to the trust. If the person does not receive fair compensation in return, a transfer penalty may be imposed.
How a transfer to a trust is treated depends on the type of trust. This section provides policy for reviewing trusts to determine whether a transfer with uncompensated value has happened and any transfer penalty period. This section discusses:
· Transfers to Special Treatment Trusts;
· Transfers to Revocable Trusts;
· Transfers to Irrevocable Trusts; and
· Irrevocable Burial Trusts.
The transfer of income or resources to a STT may affect the customer's ALTCS eligibility. The affect of a transfer depends on the type of Special Treatment Trust:
If the trust is a… |
Then… |
Trust for Disabled Individual Under Age 65 |
Transfer policy does not apply to income or resources transferred to the trust while the customer is under age 65. NOTE Any income or resources added to the trust after the customer turns 65 years of age must be reviewed as a transfer. |
Income-only Trust |
Transfer policy applies to income transferred to an Income-only trust. The amount of uncompensated value is the difference between the amount of monthly income put into the trust and the monthly amount paid out on behalf of the customer. See Example Income-only Trust. |
Pooled Trust |
Transfer policy does not apply to income or resources transferred to the trust while the customer is under age 65. NOTE Any income or resources added to the trust after the customer turns 65 years of age must be reviewed as a transfer. |
A transfer of resources into a revocable trust is not considered an uncompensated transfer because the resources in the trust are still available to the customer.
See Examples Transfers to Revocable Trusts.
When a customer creates an irrevocable trust where any part of the trust assets cannot be paid to or on behalf of the customer, that part is reviewed as a transfer for less than fair market value.
The date of transfer is the latest of the following:
· The date the trust was created;
· The date when payments to could no longer be made from the trust; or
· The date the resource was assigned to the trust.
See Example Irrevocable Trust Transfers.
Since the funds placed into a burial trust are not tied to specific good and services, they must be evaluated as a transfer. Up to $9,000 in a burial trust may be considered a compensated transfer when the burial trust meets both of the following conditions:
· The individual does not already have an irrevocable burial plan; and
· The burial trust contract specifies that any amount not used for burial will revert to the person’s estate, where it would be subject of the Estate Recovery program.
Any amount placed into a burial trust that does not meet both conditions shall be evaluated as a transfer with uncompensated value.
If the burial trust that meets both conditions but the amount in the trust is more than $9,000, the amount over $9,000 is a transfer with uncompensated value.
Term |
Definition |
Revocable |
The person who establishes the trust reserves the right to revoke it. A revocable trust can be nullified by: · Withdrawal; · Recall; · A restatement of the trust; · Reversal or revocation; or · The transfer of all trust assets out of the trust. A trust, which provides that the trust can be modified or terminated by a court, is considered to be a revocable trust. |
Irrevocable |
The trust may not be revoked after its creation, by the grantor or a representative. NOTE A trust instrument, which states that the trust is irrevocable but which will terminate by some action taken by the grantor, is considered a revocable trust. |
See MA802 for the proof needed for revocable and irrevocable trusts. See MA803 for the proof needed for Special Treatment Trusts (STT).
When assets have been placed in a trust, documents need to be provided to prove:
· The date of the transfer. Proof includes, but is not limited to, the following:
o Copy of the trust document;
o Court documents;
o Deeds; and
o Proof of disbursements.
· The equity value of the transferred item or the actual future cash value of income at the time of the transfer.
Program |
Legal Authorities |
ALTCS |
42 USC 1396p(c) and (d) AAC R9-28-401 and 409 |