F-6500, Irrevocable Trusts

Revision 09-4; Effective December 1, 2009

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.

If there are any circumstances under which payment from an irrevocable trust could be made to or for the benefit of the person, then:

• the portion of the corpus, or income generated by the corpus, from which payment could be made is a countable resource;
• payments made to or for the benefit of the person, except medical and social services, are countable income; and
• payments for any other purpose are a transfer of assets.

Although termed irrevocable, a trust which provides that the trust can only be modified or terminated by a court is a revocable trust because the person or his responsible party can petition the court to amend or terminate the trust.

Although termed irrevocable, a trust that will terminate if a certain circumstance occurs during the lifetime of the person, such as the person leaving the nursing facility and returning home, is a revocable trust.

If there are no circumstances under which payments from some portion or all of an irrevocable trust, or income generated by the trust, could be made available to a person, then the corpus, or portion of the corpus, and the generated income are considered a transfer of assets.

The date of transfer is the date the trust was established, or if terms of the trust foreclose payment to the person at a later date, the date payment is foreclosed to the person. The value of the trust, for calculating the penalty period, includes any payments made from the trust for whatever purpose after the date the trust was established or, if later, the date payment to the person was foreclosed. If funds were added to that portion of the trust after these dates, including interest earned by the trust, the addition of those funds is considered to be a new transfer of assets, effective on the date the funds are added to the trust. Thus, in treating portions of a trust which cannot be paid to a person, the value of the transferred amount is no less than its value on the date of establishment or foreclosure, and may be greater if funds were added to the trust after that date.