16 Del. Admin. Code §§ 20000-20400
BACKGROUND
The Delaware Department of Health and Social Services (DHSS), in order to comply with the Social Security Act Section 1917(c) (1) as amended by the Omnibus Budget Reconciliation Act of 1993 (OBRA '93) has established policies and procedures for treating trusts in eligibility determinations and Post eligibility treatment.
Trust For the purpose of eligibility requirements, a trust is a legal document in which a person (grantor, trustor) transfers any item of value (property, money) to another person or organization (trustee) with the intention that it is held, managed, or administered by the trustee for the benefit of the grantor or certain named individuals (beneficiaries). The trust must be valid under State law and confirmed by a valid trust instrument or agreement. A trustee has a responsibility to hold or manage the trust and income for the benefit of the beneficiaries. The term "trust" also includes any legal instrument or device that is similar to a trust. It does not cover trusts established by wills.
Trustee An individual, individuals or entity (such as an insurance company or bank) that manages a trust or similar device and has absolute responsibilities for the trust.
Grantor (Trustor) A grantor is any individual who creates a trust. For eligibility requirements, the term "grantor" includes:
- The individual
- The individual's spouse
- A person, including a court or administrative body, with legal authority to act in place of or on behalf of the individual's or the individual's spouse
- A person, including a court or administrative body, acting at the direction or upon the request of the individual, or the individuals spouse
Individual For the purpose of Medicaid eligibility requirements, an individual is one who establishes a trust and who is an applicant for or receives Medicaid. An individual is considered to have established a trust if his or her assets were used to form part or all of the trust; and if the trust was not established by a will.
Income See Section 20200 for explanation of income and how income is treated in eligibility determinations
Resource Any cash or other liquid assets or any real or personal property that an individual owns and could convert to cash to be used for his/her support and maintenance.
Beneficiary A person who gains or has an advantage or profits from the existence of a trust. A beneficiary does not hold legal title to trust property but does have an equitable ownership interest in the trust.
Payment A payment from a trust is any disbursal (money, property) from the trust principal or from income generated by the trust that benefits the person receiving the disbursal.
Annuity The right to receive fixed periodic payments either for life or a term of years.
Assets Assets include all income and resources of the individual and of the individual's spouse. Income is considered assets that are current. Resources are assets that have accumulated.
This section applies to all trusts established on or after August 11, 1993. It is based on the Omnibus Budget Reconciliation Act of 1993 (OBRA 93) rules. Treatment of trusts established prior to August 11,1993 would use pre-OBRA rules.
These instructions apply to eligibility determination for all individuals including cash assistance recipients and others who are otherwise automatically eligible and whose income and resources are not ordinarily measured against an independent Medicaid eligibility standard.
Any trust that meets the basic definition of a trust can be considered in determining eligibility for Medicaid. The characteristic of each trust determines the eligibility of the trust under Medicaid rules. In order to be eligible, trusts must state that upon the death of the individual any funds remaining in the trust will be paid to the State agency, up to the amount of Medicaid benefits paid on the individual's behalf. If an individual has resided in more than one State and has received Medicaid benefits from each state, any funds remaining in the trust are distributed to each State based on the States proportionate share of the total amount of Medicaid benefits paid by all the states.
For the purpose of eligibility a trust is considered to be revocable if under State law it can be terminated by the grantor, if the trust states that it can be changed or terminated by a court, or if the trust states that it can be terminated if some action is taken by the grantor. For example, a trust may state that it is irrevocable but it may require a trustee to terminate the trust and give all funds to the grantor if the grantor leaves a nursing facility and returns home.
The entire body of the trust is a resource to the individual. All payments from the trust to the individual are considered income to the individual if the payment benefits the individual. However, if payments are made from the trust which do not benefit the individual, those payments are considered a transfer of assets for less than market value. The look-back period is 60 months for revocable trusts from the current date that the individual applied for Medicaid.
An irrevocable trust is a trust that cannot in anyway, be legally revoked by the grantor.
Irrevocable trusts are treated differently based on whether payment can or cannot be made for the benefit of the individual.
When the terms of an irrevocable trust state that payment can be made to or for the benefit of the individual from any part or all of the trust, the payments made are considered income. Any part of the trust or payment that could be paid for the benefit of the individual is treated as an available resource.
When the terms of an irrevocable trust state that payment can be made to or for the benefit of the individual from any part or all of the trust, and the payment is not used for the benefit of the individual, the payment is treated as a transfer of assets. In this type of situation, the look-back period is 60 months.
10 DE Reg. 1613 (04/01/07)
When all or a portion of the principal or income on the principal of the trust cannot be paid to the individual or for the benefit of the individual, all of these payments are treated as a transfer of assets for less than fair market value. The date of transfer is the date the trust was established or, if later, the date on which payment to the individual was actually barred. When determining the value of the portion of the trust that cannot be paid to the individual, do not subtract from the trust the value of any payments made. If the trustee or the grantor adds funds to the trust after the date of transfer, these added funds are considered to be a new transfer of assets. The transfer date for these additional funds is the date that the new funds were placed in the trust. (Note, when determining the penalty period: if a previous penalty period is still in effect, the new penalty period cannot begin until the previous penalty period has expired.) Under this type of trust the look-back period is 60 months.
To determine if payments can or cannot be made from a trust use the following guidelines.
Any payment from the trust principal or income produced by the trust that is paid directly to the individual, or to his/her guardian or legal representative is considered to be paid to the individual.
If an individual benefits from any payment from the trust principal or income produced by a trust that is paid to another person or entity, the payment is considered to be made for the benefit of the individual.
If a payment is counted as income under the SSI program, that payment would be counted as a benefit to the individual. Payments made on behalf of the individual for medical care are not counted in determining income eligibility under the SSI program; thus, such payments are not counted as income under the trust provision.
Review the trust to determine if the trust places limits or restrictions on payments or the trustee. Only the amount of money or the portion of the trust that can or could be paid out is treated as a payment. This information is then used to determine if the payment is a resource for the individual.
An asset that is excluded from being used in the determination of eligibility. An asset is all income or resources of the individual or eligible spouse. For asset exclusions see Section 20200 and Section 20310.
The placement of an excluded asset (income or resource) in a trust does not change the excluded nature of the asset; it remains excluded. Note: For institutionalized individuals, the home is no longer an excluded resource if placed in a trust.
All income and resources of the individual or the individual's spouse that are not excluded from being used in the determination of eligibility.
Non excluded assets placed in a trust are treated as one of the following:
- available income
- available resources
- transfer of assets for less than fair market value
NOTE: AVOID IMPOSING A PENALTY FOR BOTH THE TRANSFER OF ASSETS INTO A TRUST AND THE APPLICATION OF THE TRUST PROVISIONS. THIS COULD RESULT IN THE INDIVIDUAL BEING PENALIZED TWICE FOR ACTIONS INVOLVING THE SAME ASSET.
Two exceptions to the trust eligibility policy are Special Needs Trusts and Pooled Trusts for disabled individuals.
A special needs trust contains the assets of an individual under age 65 who is disabled. It is established for the benefit of the individual by a parent, grandparent, legal guardian of the individual or a court.
Special Needs Trusts created on or after December 13, 2016 by an individual with a disability under age 65 for his or her own benefit can qualify as a special needs trust, conferring the same benefits as a special needs trust set up by a parent, grandparent, legal guardian or court. The trust may also contain the assets of other individuals.
The trust may also contain the assets of other individuals.
For individuals under age 65 the exceptions to the Medicaid eligibility rules continue even after the individual becomes age 65. No additional assets may be added to the trust after the individual reaches age 65. If assets are added they will not be exempted and are subject to penalties. To qualify as a special needs trust, the following conditions must exist:
The trust must be established solely for the needs of an individual with a disability who is under age 65.
The individual is disabled as defined by the SSI program in 1614(a)(3) of the Act.
The trust must be established by the parent(s), grandparent(s), legal guardian(s) of an individual with disabilities or a court.
For trusts created on or after 12/13/2016:
The trust must be established by the disabled individual under age 65 for his or her own benefit, the disabled individual's parent, grandparent, legal guardian or court.
In addition to the above criteria, the trust must state that upon the individual's death all remaining assets and funds should be paid to the State agency up to the amount paid in Medicaid benefits on the individual's behalf.
10 DE Reg. 1302 (02/01/07)
15 DE Reg. 202 (08/01/11)
21 DE Reg. 566 (01/01/18)
A pooled trust contains the assets of an individual with disabilities as defined by the Supplemental Security Income (SSI) Program and meets the following conditions:
The trust is established and managed by a non-profit association
A separate account is maintained for each beneficiary of the trust; for purposes of investment and management of funds, the trust pools the funds in these accounts.
Accounts in the trust are established solely for the benefit of the individual with disabilities, by the parent, grandparent, legal guardian of the individual, or by the court.
To the extent that the amounts remaining in the beneficiary's account upon the death of the beneficiary are not retained by the trust, the trust pays to the State the amount remaining in the account up to an amount equal to the total amount of medical assistance paid on behalf of the beneficiary. The trust must include a provision specifically providing for such payment to the State.
15 DE Reg. 202 (08/01/11)
15 DE Reg. 202 (08/01/11)
While trusts for an individual with disabilities are exempt from treatment under the trust rules, funds entering and leaving them are not exempt from treatment under the rules of the appropriate cash assistance program. The following are rules applicable to funds entering and leaving both kinds of exempt trusts for an individual with disabilities. (see DSSM 20400.1.1, trusts established with income and DSSM 20400.10.2, trusts established with resources).
15 DE Reg. 202 (08/01/11)
- For eligibility purposes, do not count income before it is placed in the trust.
- If a transfer of assets into a trust for an individual with disabilities is not exempted under the exceptions to the transfer of assets' rules, a penalty must be enacted.
- Post-eligibility income rules may be applied to income placed in the trust.
- Funds paid out of the trust to or for the benefit of the individual would count as income
- Spousal impoverishment provisions are also applicable as they apply to exempted trusts.
Note: When the right to income placed in a trust actually belongs to the trust and not the individual, the income does not count under SSI rules as income received by the individual.
Most trusts for an individual with disabilities are created using the individual's resources; some may be created using the individual's income or a combination of income (Income as defined by the SSI program.) and resources. When income is placed in the trust see Section 20400.11.1 - Income Trusts (Miller Trusts) for treatment of income.
15 DE Reg. 202 (08/01/11)
- Resources placed in an exempt irrevocable trust for an individual with disabilities are counted as resources only during the months in which they are in the possession of the individual. Beginning with the month the resources are placed in the trust, they are exempt from being counted as resources to the individual.
- Resources placed in an exempted trust for an individual with disabilities are subject to imposition of a penalty under the transfer of assets provisions unless:
the transfer is specifically exempt from penalty,
or unless the resources placed in the trust are used to benefit the individual,
and the trust purchases items and services for the individual at fair market value.
NOTE: These rules apply to both income and resources placed in an exempt trust.
15 DE Reg. 202 (08/01/11)
This type of trust is composed only of Social Security, pension, and/or other income to the individual, including accumulated interest in the trusts.
To qualify, the individual must receive the income and place it into a Miller trust. If an individual has transferred his/her right to receive the income, and the income is legally received by the trust, then this income is no longer considered to be the individual's income. In this situation the income does not meet the requirements for exemption.
A Miller Trust must be irrevocable.
The trust must be composed only of income. No resources may be used to establish or add to the trust. The inclusion of resources will void the Medicaid eligibility of the trust.
The trust must state that, upon the death of the individual, the State will receive all funds remaining in the trust, up to an amount equal to the total medical assistance paid on behalf of the individual under the State Medicaid plan.
When a trust meets all requirements for exemption, and is irrevocable, the corpus of the trust is exempt from being counted as available to the individual. A revocable trust is counted under SSI rules as an available resource to the individual.
Income (Social Security benefits, VA pensions, private pensions, etc.) can be placed directly into a Miller trust by the recipient of those funds, without those funds adversely affecting the individual's eligibility for Medicaid. Income generated by the trust that remains in the trust is not income to the individual.
Transfer of assets penalties do not apply to income placed in a Miller trust if the provisions of the trust state that income placed in the trust will be used for medical care provided to the individual (nursing facility or home care provided under a community-based waiver, etc.). When such payments are made, the individual is considered to have received fair market value for the income placed in the trust, up to the amount actually paid for medical care provided to the individual and to the extent that the payments purchased care at fair market value.
NOTE: PAYMENTS (e.g. patient pay) FOR MEDICAL CARE SHOULD BE MADE IN MONTHLY INTERVALS TO AVOID TRANSFER OF ASSETS PENALTIES.
Funds placed in a Miller trust can be transferred for the sole benefit of a spouse (medical care for the community spouse). Transfer penalties do not apply to assets transferred to a spouse.
Transfer of property penalties can be avoided if the trust states that the property can only be used for the benefit of the individual's spouse while the trust exists, and that the trust cannot be terminated and distributed to any other individuals or entities for any other purpose.
Funds placed in the trust that are used for the benefit of the individual, (administrative fees for the trust, income tax owed by the trust, attorney's fees, food, clothing, or mortgage payments) are exempt from transfer of assets penalties if they reflect fair payments for the items or services that were purchased.
NOTE: There is NO provision for the use of funds in this manner to be deducted in calculations for the Patient Pay Amount (PPA).
When income placed in the trust exceeds the amount paid out of the trust for medical services or other items or services that benefit the individual, the excess income is subject to penalties under the transfer of assets provisions.
Payments from the trust may still count as income to the individual under the State Medicaid Plan. Payments made from a Miller Trust directly to the individual are counted as income to the individual, provided the individual could use the payments for food, clothing, or shelter. This rule applies whether or not the payments actually are used for these purposes, as long as there are no legal impediments that prevent the individual from using the payments this way.
Any payments made by the trustee to purchase something in kind for the individual also can count as income to the individual. In kind income include actual food, clothing, or shelter, or something the individual can use to obtain one of these. For example, if the trustee makes a mortgage payment for the individual, that payment is a shelter expense and counts as income. However, medical expenses paid on behalf of the individual are not counted as income to the individual.
Income that is retained by the individual is subject to post-eligibility rules. See post eligibility rules in Section 20600.
Although income placed in a Miller trust is not counted for Medicaid eligibility purposes, the income is counted for post-eligibility purposes. Post-eligibility rules are applied to all income entering the trust.
If not used for medical care costs, payments from the Miller trust may be counted for eligibility purposes. However, payments made from a Miller trust are not considered for post-eligibility purposes. Post-eligibility rules have already been applied to all income entering the trust through the patient pay calculation.
All funds placed in a Miller trust are subject to the post-eligibility treatment of income rules, including funds applicable to spousal impoverishment.
Undue hardship exists when application of the trust provisions would deprive the individual of medical care such that his/her life would be endangered. Undue hardship also exists when application of the trust provisions would deprive the individual of food, clothing, shelter or other necessities of life.
A burial trust is a trust established by an individual for the purpose of paying, at some point in the future, for the various expenses associated with the individual's funeral and burial. Irrevocable prepaid burial trusts that do not exceed $15,000 are exempted under the undue hardship policy.
11 DE Reg. 1051 (02/01/08)
16 Del. Admin. Code §§ 20000-20400
21 DE Reg. 566( 1/1/2018) (Final)