Treatment of Medicaid Qualifying Trusts (MQT)

Treatment of Medicaid Qualifying Trusts (MQT). A. The provisions in this section are applicable to any trust or similar legal device established on or after March 1, 1987, through August 10, 1993, that meet MQT criteria. If MQT criteria are not met, defer to Standard Trust policy. 1. A Medicaid Qualifying Trust is a trust or similar device, which: a) Is established (other than by will) with the applicant/recipient’s own funds, by the applicant/recipient (or spouse); b) Names the applicant/recipient as the trust beneficiary for all or part of the payments from the trus; and c) Permits the trustee to exercise any discretion with respect to the distribution of such payments to the individual. 2. The MQT provision is applied without regard to whether or not: a) The MQT is revocable or irrevocable; or b) The MQT is established for purposes other than to qualify for Medicaid; or c) The discretion of the trustee is actually exercised. 3. In determining whether an MQT exists, look for 3 main components: a) The grantor is the Medicaid client or his representative (e.g., spouse, parent, guardian, conservator or anyone holding power of attorney for the client); b) The trust was established with property belonging to the client; and c) The client is at least one of the beneficiaries of the trust. 4. In addition, the following principles must be considered: a) The client is considered the grantor even if the trust was established pursuant to court order issued upon the petition of the client or his representative. In this situation, the court acts as the client’s agent in establishing the trust. b) It is not necessary that there be a trust agreement, as defined by state law, for MQT trust policies to apply. MQT trust policies apply to “similar legal devices” or arrangements having all of the characteristics of an MQT, except there is no actual trust instrument. 1) Examples are: (a) Escrow accounts; (b) Savings accounts; (c) Pension funds; (d) Annuities; (e) Investment accounts; and (f) Other accounts managed by agent with fiduciary obligations, such as conservatorships or guardianships. c) The MQT provision does not apply to trust agreements established by will. These trusts are treated as standard trusts. However, if a client inherits resources and in turn establishes a trust, the MQT provision could apply. 5. Each trust document must be reviewed individually to determine the resource treatment of the trust, but in general use the following criteria to determine resource treatment: a) Revocable MQT. 1) The entire corpus of the trust is an available resource to the client. Resources comprising the corpus are subject to individual resource exclusions, if applicable, since the client can access these resources. An exception is exclusion of the home for institutionalized recipients. Home property loses its excluded status when transferred into an MQT. b) Irrevocable MQT. 1) The countable amount of the corpus is the maximum amount the trustee can disburse to (or for the benefit of) the client, using his full discretionary power under the terms of the trust. Resources transferred to an irrevocable MQT lose individual resource consideration. (a) Example: Home property transferred to such a trust can no longer be excluded as home property but is included in the value of the corpus. 2) If the trustee has unrestricted access to the corpus and has discretionary power to disburse the entire corpus to the client (or to use it for the client’s benefit), then the entire corpus is an available resource to the client. 3) If the trust does not specify an amount for distribution from the corpus of the trust or from income produced by the corpus, but the trustee has access to and use of both corpus and income, the entire amount is an available resource to the client. 4) If the trust permits a specified amount of trust income to be distributed to the client (or to be used for his benefit), but these distributions are not made, then client’s countable resources increase cumulatively by the undistributed amount. 6. In general use the following criteria to determine treatment of income from an MQT: a) Amounts of trust income distributed to the client are counted as income when distributed. b) Amounts of trust income distributed to third parties for the client’s benefit (including payments for medical services) are countable income when distributed. c) Exculpatory Clauses which limit the authority of the trustee to distribute funds from a trust if such distribution would jeopardize eligibility for government programs are ignored for MQT purposes if the language explicitly or implicitly links the trustee’s discretion to Medicaid requirements. 7. Handle a transfer of assets under this policy as follows: a) If the MQT is irrevocable, a transfer of assets has occurred if the resources are no longer available to the client. 1) Resources rendered unavailable are subject to the transfer penalty based on the value of the unavailable resources without consideration of whether the resource would have been excluded under ongoing policy. 8. The MQT provision may be waived if an undue hardship is determined to exist: . a) This means Medicaid should not be denied to an individual under this provision if the individual would be forced to go without life-sustaining services because the trust funds cannot be released. 1) This does not include situations where the trustee simple chooses not to make the trust funds available.