Probate & Trust Law Section Conference Manual ... - Minnesota CLE

iii.
Discretionary Trust
Trusts created with assets of someone other than the recipient or someone with a financial
obligation to that person, are not considered available if the recipient as “restricted access” to
the Trust funds. Restricted access means that only a Trustee can withdraw funds, or in other
words, the Trustee has broad and absolute discretion to make distributions or not. Health Care
Programs Manuel (HCPM) §19.25.35.30, see also, In re Horton, 668 N.W.2d 208 (Minn.App.
2003); In re Flygare, 725 N.W. 2d 114 (Minn.App. 2007); and Irrevocable Trust Agreement of
Craig C. Wilcox, (Minn.App 2009 – UNPUBLISHED OPINION)(This is a line of cases that stands for the
proposition that any standards for distribution beyond a pure statement of Trustee discretion
will render the Trust corpus available to the beneficiary for purposes of Medical Assistance
eligibility). The applicant for or recipient of Medical Assistance may be required to ask the
Trustee for distributions, but the Trustee’s refusal to make distributions will not disqualify the
beneficiary from receiving Medical Assistance. A third party can, as a result, establish a
“restricted access Trust” for the benefit of a disabled individual without jeopardizing that
person’s eligibility for Medical Assistance with language that provides the Trustee with the
“sole and absolute discretion to distribute some, none or all of the trust income and principal
for the benefit of the beneficiary” and notes that “the beneficiary shall have no recourse to
force the trustee to make distributions for his or her benefit.” The advantages of this type of
Trust over a SupplementalNeedsTrust include:
• Certification of disability is not required at the time the Trust is established.
• Avoid the loss of enforceability if the beneficiary is 65 or older and a permanent resident
of a nursing home or state facility.
• Reduce the need for required vendor payments.
• Less frustrating management for a beneficiary who overcomes the disability, no longer
needs public assistance and would prefer to manage financial affairs on his or her own.
A purely discretionary trust is less attractive because:
The trustee has absolute discretion leaving the beneficiary without recourse if the
trustee is lazy or vindictive.
The availability of trust resources is based only the statutory interpretation of the
Minnesota Court of Appeals in decisions where it found trusts to be available because
the trust language included distribution standards. No appellate court has held that
purely discretionary trusts are unavailable so the concept could be undone with one bad
case.
iv.
Pooled SupplementalNeedsTrust
Lutheran Social Service of Minnesota administers a Pooled SupplementalNeedsTrust along with
its Pooled SpecialNeedsTrusts. This can be a convenient, lower cost alternative to the
4 Supplemental & Special Needs Trust Basics | Jeffrey W. Schmidt