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

ii.
Pooled SpecialNeedsTrust Has An Age Limit (65) But Not Really
The beneficiary of a Pooled SpecialNeedsTrust can be any age at the time of its creation. The
federal statutory provisions that allow for the establishment of a Pooled SpecialNeedsTrusthave
no age limit while the provisions for a standard SpecialNeedsTrust include a specific reference
limiting establishment to a beneficiary who is under the age of 65. Federal law also creates an
exception to the penalties imposed for a transfer of assets for less than fair market value for
the funding of SpecialNeedsTrusts with a specific limitation to transfers before age 65. 42 U.S.C.
1396p(c). Questions have always lingered and continue to linger about whether this exception
applies to contributions to Pooled SpecialNeedsTrusts after the beneficiary turns 65.
Minnesota did not penalized over 65 funding of a Pooled SpecialNeedsTrust for many years.
New concerns arose when the Regional Director of the Centers for Medicare and Medicaid
Services for Region I (New England) issued a Memorandum to State Medicaid Directors in
Region I stating that transfers to a Pooled SpecialNeedsTrust by a beneficiary over the age of 65
should be subject to asset transfer penalties.
Based on the information contained in the CMS Regional Director memo described above, and
memos like it which have been issued by other CMS Regional Directors, the Minnesota
Department of Human Services declared that it has always been its policy to treat contributions
to a Pooled Special Needs Trust after the beneficiary turns age 65 as transfers of assets for less
than fair market value subject to a period of ineligibility. In a December 2006 HealthQuest
System answer, however, the Department stated that so long as all the criteria for a valid
pooled special needs trust are met, including reimbursement to the state at death, “[t]here is
no improper transfer.” MDHS HealthQuest #6046 (December 22, 2006). The Department
followed up on this “non‐change” in policy by successfully asking the legislature to codifying
this treatment of transfers to Pooled Trust Accounts after age 65. The section imposing a
period of ineligibility for transfers for less than fair market value (Minn.Stat. § 256B.0595, subd.
1) was augmented with a new paragraph (k) as follows:
(k)
This section [imposing a period of ineligibility] applies to transfers into a pooled Trust
that qualifies under United States Code, title 42, section 1396p(d)(4)(C), by:
(1) A person age 65 or older or the person's spouse; or
(2) Any person, court, or administrative body with legal authority to act in place of,
on behalf of, at the direction of, or upon the request of a person age 65 or older
or the person's spouse.
Experience with Pooled Special Needs Trusts following the passage of these provisions has not
prevented the creation of Pooled Trust accounts for individuals over the age of 65. While the
addition of funds to a Pooled Trust after 65 must be analyzed as a transfer potentially subject to
the imposition of a period of ineligibility, the transfer must also be analyzed to determine if it
was made for less than fair market value. Since the funds placed into the Pooled Trust account
can only be used for the sole benefit of the Trust beneficiary and since any remaining funds will
11 Supplemental & Special Needs Trust Basics | Jeffrey W. Schmidt