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

eimburse the State following the beneficiary’s death, the beneficiary or the State will receive
the full value of the contributions to the Trust. The transfers into the Trust, as a result, are
made for value. Only transfers made for less than fair market value will be subject to the
imposition of a period of ineligibility. Your results may vary; however, as this “new” policy has
only been in place for short time and individual County agencies may be treating Pooled Trust
contributions after 65 inconsistently.
A recent, Douglas County Minnesota case found that a fair market analysis is required to
determine whether a transfer into a pooled Special Needs Trust should be subject to a period of
ineligibility. Dziuk vs. DHS, 21‐CV‐09‐1074 (Douglas County District Court, February 7, 2012).
The 8 th Circuit Court of Appeals recently decided transfers into a pooled Special Needs Trust
must be analyzed to determine whether an asset transfer penalty applies but did not address
the issue of whether fair market value is received when the trust account is funded. Center for
Special Needs Trust Administration v. Olson, 11‐2158 (8 th Cir. April 16, 2012). The 3rd Circuit
said “Congress intended that special needs trusts be defined by a specific set of criteria that is
set for and no others[,]” and then went on to find that Pennsylvania laws attempting to, among
other thing, prohibit individuals over age 65 from establishing pooled special needs trusts
preempted by federal law. Lewis v. Alexander, No. 11‐3439 (3 rd Circuit, June 20, 2012). The
Lewis Court did not address whether a transfer to a special needs trust is for fair market value
but disappointingly concluded that “Congress could have rationally concluded that the benefits
of making special needs trust available to elderly individuals outweighed the burden of the
penalty.” The South Dakota Supreme Court also issued a decision on the same issue, drawing
the same conclusions, but also finding that the transfer into the Trust was not for fair value. In
Re: Pooled Advocate Trust, 2012 S.D. 24 (March 28, 2012). The South Dakota Court made this
fair market value conclusion, however, without the benefit of facts or analysis to support it.
iii.
SupplementalNeedsTrust has No Age Limit
The beneficiary of a SupplementalNeedsTrust can be any age. However, if the beneficiary is age
65 or older and is a permanent resident of a nursing home or state facility, the Supplemental
nature of the Trust is no longer enforceable. In other words, the assets in the Trust will be
deemed available to pay for the beneficiary’s long‐term care Needs if these conditions apply. It
is possible to have a SupplementalNeedsTrustbeneficiary in a nursing facility and over age 65
and maintain the unavailability of trust assets if the attending physician certifies that there is a
reasonable expectation that the individual will return to the community.
e. Testamentary or Inter Vivos?
A SpecialNeedsTrust is always a "living Trust." The Trust should only be established with the
assets of the individual with a disability. The purpose of the Trust is to allow use of those assets
during the lifetime of the beneficiary. A testamentary SpecialNeedsTrust, as a result, could
never be funded or used because the sole beneficiary will already be dead.
12 Supplemental & Special Needs Trust Basics | Jeffrey W. Schmidt