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

h. Revocable vs. Irrevocable
i. SpecialNeedsTrust= Irrevocable
A Special Needs Trust needs to be irrevocable. If the beneficiary has the right to revoke the
Trust, its assets will be considered available merely because the possibility of revocation exists.
If someone other than the beneficiary has the ability to revoke the Trust, the resources of the
Trust should not be considered available. If someone else has the authority to revoke,
however, the County agency could easily take the position that it should be revoked,
necessitating the additional time and expense needed to demonstrate that revocation is not
required by law. In addition, the recent trouble that has arisen with termination clauses (see
below) would apply with full force to any consideration of a third‐party revocation for a Special
Needs Trust.
The revocability of a Special Needs Trust is critical to the determination of whether its corpus is
available for purposes of determining SSI eligibility. In Region V (including Minnesota) a Special
Needs Trust is deemed to be revocable, even if the Trust language specifically prohibits
revocation, if the mutual consent of the grantor and all beneficiaries can be obtained. Where
the grantor and the sole beneficiary of the Trust are the same person and that person is the SSI
applicant or recipient, the Trust is considered revocable by SSI and the entire Trust corpus is
available unless there is a residual beneficiary.
The designation of a "residual beneficiary" (someone other than the SSI applicant or recipient)
to receive the Trust property at the death of the primary beneficiary is enough to keep an
irrevocable trust irrevocable. A residual beneficiary can include a named individual or a class
such as parents, siblings, children, descendants or issue (provided the beneficiary actually has
living people who fall into the class named). Making a post‐mortem distribution to the person's
estate, executor, heirs, or next of kin, or making reference to any governing state law
concerning distribution or intestacy is not sufficient to establish a residual beneficiary. It is also
apparent that including a pay‐back provision requiring reimbursement to the State for any
Medical Assistance benefits paid does not create a residual beneficiary.
ii.
SupplementalNeedsTrust = Irrevocable or Revocable
The settlors of a Supplemental Needs Trust can retain the right to revoke the Trust or designate
it as irrevocable. Younger parents of a child with a disability might consider a revocable
Supplemental Needs Trust to easily manage a change in circumstances. Older parents might
lean toward an irrevocable Trust, anticipating the use of the Trust as a repository for transfers
they might make to protect assets from their own long term care costs and avoid the
imposition of a period of ineligibility. If the Supplemental Needs Trust is revocable, then the
settlors could in theory, revoke the Trust and use its resources to pay for care before Medical
Assistance benefits could be available. Of course, a Supplemental Needs Trust can always start
out as revocable with the settlors amending it to make it irrevocable as the need arises.
16 Supplemental & Special Needs Trust Basics | Jeffrey W. Schmidt