General Trust Definitions - OBRA-93 and DRA Trust Policy

General Trust Definitions - OBRA-93 and DRA Trust Policy A. Introduction. 1. Section 13611 of the Omnibus Budget Reconciliation Act of 1993 (P.L. 103-66) amended Section 1917(d) of the Social Security Act to revise the treatment of trusts effective with trusts established after the date of enactment of OBRA-93, which was August 11, 1993. Trusts established before this date, but added to or otherwise augmented after this date, are treated under OBRA-93 Trust rules. 2. OBRA-93 Transfer of Assets policy is used in conjunction with OBRA-93 Trust policy and provisions of the Deficit Reduction Act of 2005 (DRA), which amended rules on transfer of assets for less than fair market value by broadening the spectrum of what is considered a transfer, the length of the penalty period, the look back period for transfers, the definition of assets and how penalty periods run consecutively rather than concurrently. B. Trust Definitions (OBRA-93 and DRA). 1. For purposes of this rule, a trust is any arrangement in which a grantor transfers property to a trustee or trustees with the intention that it be held, managed, or administered by the trustee(s) for the benefit of the grantor or certain designated individuals (beneficiaries). The trust must be valid under State law and manifested by a valid trust instrument or agreement. A trustee holds a fiduciary responsibility to hold or manage the trust's corpus and income for the benefit of the beneficiaries. The term "trust" also includes any legal instrument or device that is similar to a trust. It does not cover trusts established by will. Such trusts must be dealt with using Standard Trust policy. 2. A Legal Instrument or Device Similar to Trust is any legal instrument, device, or arrangement which may not be called a trust under State law but which is similar to a trust. That is, it involves a grantor who transfers property to an individual or entity with fiduciary obligations (considered a trustee for purposes of this section). The grantor makes the transfer with the intention that it be held, managed, or administered by the individual or entity for the benefit of the grantor or others. This can include (but is not limited to) escrow accounts, investment accounts, pension funds, and other similar devices managed by an individual or entity with fiduciary obligations. 3. A trustee is any individual, individuals, or entity (such as an insurance company or bank) that manages a trust or similar device and has fiduciary responsibilities. 4. A grantor is any individual who creates a trust. For purposes of this rule, the term "grantor" includes: a) The individual; b) The individual’s spouse; c) A person, including a court or administrative body, with legal authority to act in place of or on behalf of the individual or the individual’s spouse; and d) A person, including a court or administrative body, acting at the direction or upon the request of the individual, or the individual’s spouse. 5. A revocable trust is a trust which can under State law be revoked by the grantor. A trust which provides that the trust can only be modified or terminated by a court is considered to be a revocable trust, since the grantor (or his/her representative) can petition the court to terminate the trust. Also, a trust which is called irrevocable but which terminates if some action is taken by the grantor is a revocable trust for purposes of this instruction. 6. An irrevocable trust is a trust which cannot, in any way, be amended or revoked by the grantor. Being irrevocable does not make the trust unavailable as a resource for Medicaid purposes. 7. A beneficiary is any individual or individuals designated in the trust instrument as benefiting in some way from the trust, excluding the trustee or any other individual whose benefit consists only of reasonable fees or payments for managing or administering the trust. The beneficiary can be the grantor himself, another individual or individuals, or a combination of any of these parties. For purposes of this rule, the beneficiary of a trust must be the applicant or Medicaid beneficiary or another allowable person, as described in the trust and transfer of assets rules, and under specified conditions. A transfer of assets will result if the trust beneficiary named is not an allowable person and the trust is funded with assets belonging to an applicant or Medicaid beneficiary and/or spouse. 8. For purposes of this rule, a payment from a trust is any disbursal from the corpus of the trust or from income generated by the trust which benefits the party receiving it. A payment may include actual cash, as well as noncash or property disbursements, such as the right to use and occupy real property.