SI DAL01120.200 Trust Property

See SI 01120.200

A. Background

Trusts involving SSI applicants/recipients/deemors must be reviewed to determine if they are countable resources. In reviewing a trust, several factors must be evaluated, including the identity of the grantor and the beneficiary. Also a determination of whether the trust is revocable according to the terms of the agreement and State law must be made. In general, the trust is not a resource to a trust beneficiary unless he/she can revoke the trust and access the principal. In Arkansas, New Mexico, Oklahoma, and Texas, the trust principal is revocable, regardless of the terms of the agreement, if the grantor of the trust is also the sole beneficiary. If there is more than one beneficiary, the trust is not a revocable grantor trust.

B. Reviewing the Trust Document

The beneficiaries of a trust include not only the named trust beneficiary, but may also include individuals and State agencies who will receive the trust principal upon the death of the trust beneficiary. Thus, when determining the number of beneficiaries of a trust, examine the part of the trust that names the trust beneficiary and the part of the trust which names the "residual beneficiaries" (i.e., the individual/State agency that will receive any remaining trust principal upon the death of the trust beneficiary).

To identify possible "residual beneficiaries," locate the part of the trust, which discusses who will receive the proceeds of the trust upon the death of the beneficiary. If there is more than one beneficiary (including any residual beneficiaries), the trust is not a revocable "grantor trust" (SI 01120.200B.8).

In Louisiana, the grantor may revoke the trust only if he/she specifically reserved the right to revoke the trust in the language of the trust document. Therefore, a determination of the number of trust beneficiaries is not necessary.

C. Residual Beneficiary by State

To determine if a trust has "residual beneficiaries," State law must be considered. In Texas, Arkansas, Oklahoma, and New Mexico, State laws are essentially the same. In these four States, the trust must be specific as to who receives the proceeds of the trust upon the beneficiary's death in order to determine that a residual beneficiary(ies) exists.

If a residual beneficiary(ies) exists, the trust does not have a sole beneficiary, and thus, it is not a revocable grantor trust. State law in these four States provides that terms such as "heirs" and "next of kin" are not considered specific enough to be considered residual beneficiaries. Terms such as "children," "issue," and "descendants" are specific and indicate a residual beneficiary.

If SSA determines that a trust is not a resource, this does not necessarily mean that the Medicaid State Agency will also not count the trust as a resource. Each State makes its own determination of a trust as a resource. (SI 01730.048) Section 1917(d) of the Social Security Act essentially provides, among other things, that a trust will count in determining eligibility for Medicaid unless a provision is included in the trust which provides that the State agency administering the Medicaid program will receive all amounts remaining in the trust upon the death of the beneficiary up to the amount of medical assistance paid out by the State on behalf of the individual. If such language is in the trust, then the State Medicaid agency is also considered a residual beneficiary, and thus, the trust would not be a revocable grantor trust.

D. Region VI State Laws Regarding Trusts

1. Arkansas

Arkansas does not have a statute which expressly provides that a grantor can be the sole beneficiary of a trust. However, Arkansas courts have recognized that a grantor can create a trust whereby he or she is the sole beneficiary. Under Arkansas law, a grantor also has the right to revoke a trust in whole or in part provided the written consent of the grantor and all named beneficiaries is obtained. In the situation where the grantor and the beneficiary are the same individual, this individual could revoke the trust. Therefore, the grantor of a trust who is also the sole beneficiary may revoke the trust even if the trust instrument provides that the trust is irrevocable.

2. Louisiana

Louisiana law expressly provides that a grantor may create a trust whereby he or she is the sole beneficiary of a trust. However, a grantor may revoke such a trust in whole or in part only if he/she has reserved the right. Therefore, a trust where the grantor and the sole beneficiary are the same individual cannot be revoked unless the right to revoke is reserved by the grantor. Field offices should continue to treat