F-6700, Exception Trusts | Texas Health and Human Services

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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.

The Omnibus Budget Reconciliation Act of 1993 identifies several types of trusts which are exceptions to the trust provisions stated in F-6300, Trusts (Aug. 11, 1993, and After). These exceptions apply only to trusts established on or after Aug. 11, 1993.

F-6710 Special Needs Trust

Revision 20-3; Effective September 1, 2020

Special needs trust:

A special needs trust is a revocable or irrevocable trust established with the assets (income or resources) of a person under age 65 who meets the SSI program's disability criteria. The trust must be established for the person’s benefit by a parent, grandparent, legal guardian, a court or the person. Beginning Dec. 13, 2016, people under age 65 who meet the SSI program's disability criteria may establish a special needs trust for their own benefit. The trust must include a provision that the state is designated as the residuary beneficiary to receive, at the person's death, funds remaining in the trust equal to the total amount of Medicaid paid on their behalf.

Use Form H1210, Subrogation (Trusts/Annuities/Court Settlements), to report to the Provider Claims Payment Section any potential paybacks to the state as the residuary beneficiary of special needs trusts.

This trust exception continues even after a person becomes age 65 if the individual continues to meet the disability criteria for the SSI program. However, additions or augmentations to the trust after the person becomes age 65 are a transfer of assets.

If a person is receiving disability benefits from SSI, RSDI or Railroad Retirement (RR), their disability is automatically established. Verify that the SSI, RSDI or RR benefit is a disability benefit. Otherwise, disability must be established.

Related Policy

Documentation and Verification Guide, Appendix XVI

F-6711 Treatment as Resource

Revision 09-4; Effective December 1, 2009

The trust is not counted as a resource.

F-6712 Treatment as Income

Revision 18-1; Effective March 1, 2018

Any distribution paid directly from a trust to the individual or to a third party for the benefit of the individual is unearned income to the individual in the month of receipt, except:

payments for medical or social services for the trust beneficiary (E-1000, General Income, for an explanation of medical and social services); and
payments to the trust beneficiary’s Achieving a Better Life Experience account (E-3331.4, Treatment of Interest and Dividends Earned on an Achieving a Better Life Experience (ABLE) Account).

A payment to or for the benefit of the individual is counted under trust provisions only if such payment is ordinarily counted as income.

F-6713 Transfer of Assets

Revision 09-4; Effective December 1, 2009

Transfer-of-assets provisions do not apply when such a trust is established. However, if assets are transferred to another party from the corpus or income generated by the corpus, then the policy in Chapter I, Transfer of Assets, applies.

F-6720 Pooled Trust

Revision 09-4; Effective December 1, 2009

Pooled trust:

Note: Zebley funds may be used to establish pooled trusts.

A pooled trust is a revocable or irrevocable trust containing the assets of a person who meets SSI's definition of disability and which satisfies the following conditions:

It was established and is managed by a non-profit association.
A separate account is maintained for each beneficiary but, for investment and management purposes, the accounts may be pooled.
Accounts in the trust are established solely for the benefit of persons who meet SSI's disability criteria, and the trusts are established by a parent, grandparent or legal guardian of such individuals by a court, or by the disabled individuals themselves.
The trust must include a provision that, to the extent that amounts remaining in a person's account at his death are not retained by the trust, the state is reimbursed in an amount equal to the total amount Medicaid paid on the person's behalf.

Note: Use Form H1210 to report to the Provider Claims Payment Section any potential paybacks to the state as the residuary beneficiary of pooled trusts.

Examples of pooled trusts are:

The ARC of Texas Master Pooled Trust, established in 1997.
Declaration of Trust for the Travis County Master Trust; Founders Trust Company, Trustee, adopted by decree of the District Court of Travis County, Texas, 201st Judicial District, effective Aug. 1, 1993.
Declaration of Trust for Children for Whom the Texas Department of Protective and Regulatory Services is Managing Conservator or Who Are or Have Been Under its Jurisdiction; Boatmen's National Bank of Austin, Trustee, adopted by decree of the District Court of Travis County, Texas, 98th Judicial District, effective June 1, 1993.

F-6721 Treatment as Resource

Revision 09-4; Effective December 1, 2009

The trust is not counted as a resource.

F-6722 Treatment as Income

Revision 18-1; Effective March 1, 2018

Any distribution to or for the benefit of the person from corpus or income generated by the trust is countable income, except the following distributions:

payments for medical or social services (See E-1000, General Income, for an explanation of medical and social services); and
payments to an Achieving a Better Life Experience account (E-3331.4, Treatment of Interest and Dividends Earned on an Achieving a Better Life Experience (ABLE) Account.).

A payment to or for the benefit of the person is counted under trust provisions only if such payment is ordinarily counted as income.

F-6723 Transfer of Assets

Revision 09-4; Effective December 1, 2009

Transfer-of-assets provisions do not apply when a pooled trust is established for the benefit of a person under age 65. If the person is age 65 or older, or if the person's portion of the assets in the trust are transferred to another party, then the policy in Chapter I, Transfer of Assets, applies.