When reviewing the trust, the CAO will:
Count the entire principal of the trust as an available resource
Count payments from the trust made to or for the benefit of the individual as income
Count payments from the trust which are not made to, or on behalf of, the individual as assets transferred for less than fair market value. See Chapter 440, Section 440.8 - Disposition of Assets (on or after July 30, 1994) and Fair Consideration.
55 Pa. Code §178.104 55 Pa. Code
When reviewing the trust, the CAO will:
Count actual payments from income or from the principal of the trust made to, or for the benefit of, the individual as income.
Count income (such as interest) on the principal of the trust which could be paid to, or for the benefit of, the individual as a resource.
Count the portion of the principal that could be paid to,or for the benefit of, the individual as a resource.
Count payments from or from the principal that are made,but not to or for the benefits of the individual, as a transfer of assets for less than fair market valve.
When all or a portion of the principal or income of a trust cannot be paid to the individual, treat all or any such portion of the principal or income as a transfer of assets for less than fair market value.
The date of the transfer is:
The date the trust was established; or
If later, the date on which payment to the individual was foreclosed (such as a trust provision that prohibits payments to an individual upon the individual’s admission into a long-term care facility).
For transfer of asset purposes, in determining the value of the portion of the trust which cannot be paid to the individual, the CAO will not subtract from the value of the trust any payments made, for whatever purpose, after the date the trust was established or, if later, the date payment to the individual was foreclosed.
If the trustee or the grantor adds funds to that portion of the trust after these dates, the addition of those funds is considered to be a new transfer of assets, effective on the date the funds are added to that portion of the trust.
Payments are considered to be made to the individual when any amount from the trust, including an amount from the principal or income of the trust, is paid directly to the individual or to someone acting on his/her behalf (such as a guardian or legal representative) as specified in Section 441.41 - Revocable Trusts or Section 441.42 - Irrevocable Trusts When Payment Can Be Made To The Individual Under The Terms Of the Trust.
Payments made for the benefit of the individual include an amount from the principal or income of the trust paid to another person or entity for the benefit of the individual. For example, these payments could include the purchase of clothing, a radio or a television. Also, these payments could include payment for services the individual may require or medical or personal care that the individual may need. Payments to maintain a home are also payments for the benefit of the individual.
In determining whether payments can or cannot be made from a trust to or for the benefit of the individual, the CAO will take into account restrictions on payments that may be included in the trust.
EXAMPLE: If an irrevocable trust provides that the trustee can give only $1,000 to or for the individual out of a $20,000 trust, only the $1,000 is counted. The remaining $19,000 is treated as an amount which cannot, under any circumstances, be made to, or for the benefit of, the individual. The $19,000 is subject to the transfer of assets rule.
In general, other than with Special Needs Trusts as defined in 441.51, when an asset is placed into a trust, a transfer of assets for less than fair market value has occurred.
An individual who places an asset in a trust generally gives up ownership of the asset to the trust. If the individual does not receive fair compensation in return, a penalty is imposed under the transfer of assets provisions.
The trust provisions contain specific requirements for treatment of assets placed in trust as available income, available resources, and/or a transfer of assets for less than fair market value, depending on the circumstances of the particular trust. Refer to Sections 441.41 through 441.43. Applying the trust provisions and a penalty for the transfer of assets into the trust could result in the individual being penalized twice for actions involving the same asset.
To avoid such a double penalty, application of one provision must take precedence over application of the other provision. Because the trust provisions are more specific and detailed in their requirements for dealing with funds placed in a trust, the trust provisions are given precedence in dealing with assets placed in trusts. Deal with assets placed in trust exclusively under the trust provisions (which, in some instances, require that trust assets be treated as a transfer of assets for less than fair market value).
NOTE: Pursuant to the transfer of assets provisions, an individual may transfer funds to a trust without incurring any period of ineligibility for the transfer. These exceptions include:
A transfer to a trust established solely for the individual’s disabled child, including a Special Needs Trust (See Section 441.51).
A trust established solely for the benefit of a disabled individual under 65 years of age, including a Special Needs Trust (See Section Section 441.51).
Updated July 11,2014