CFMF administers two types of trusts: The Master Trust and the Pooled Medicaid Payback Trust.   The type of CFMF Trust utilized will depend on the source of the funds to be transferred to the Trust.  Are the funds owned by or available to the Beneficiary?  Then it is likely the Beneficiary requires a Pooled Medicaid Payback Trust.  Are the funds owned by someone other than the Beneficiary and have not been distributed to the Beneficiary?  Then a Master Trust may be appropriate.  CFMF cannot determine which Trust is needed; instead, a special needs or elder law attorney should be consulted.

 

Master Trust

The Master Trust is a discretionary third-party trust and is frequently used in combination with an overall estate or financial planning strategy. The funds deposited in a Master Trust account cannot be owned or available to a Beneficiary.  Instead, Master Trusts are funded with assets not owned by the Beneficiary, but that come from sources such as a gift directly to the trust, inheritance, will, life insurance policy, or other trust, and are deposited directly into the CFMF trust account to be used to pay for the Beneficiary’s supplemental needs. Even though a parent or grandparent is typically the person who establishes it, anyone other than the Beneficiary can be the grantor, or creator, of a Master Trust for the benefit of a person with a disability.  A CFMF Master Trust can be revocable or irrevocable, but regardless of the choice when it is established, the trust becomes irrevocable when the grantor dies (or at the death of the last surviving grantor if there is more than one grantor). CFMF will accept an unfunded Master Trust with the understanding it will be funded at a later date, or it will accept a Master Trust accompanied by an immediate deposit.  While a Master Trust can be funded with any amount, the balance in the trust must reach $15,000 before a distribution can be made.  Once the trust balance reaches $15,000, it can be distributed and there is no requirement to maintain a $15,000 balance.

Common examples of when a Master Trust is used:

  • Someone desiring a professional trustee and trust advisor who has demonstrated experience with special needs trust administration
  • A parent establishing a trust for a child to be funded with life insurance when the parent dies
  • A grandparent looking to make a completed gift to a grandchild
  • A sibling wanting to provide for a brother or sister with a disability but not knowing who will pass away first
  • Divorced parents wanting an agreed-upon plan for a child that neither can revoke or amend
  • A professional or family member trustee who is unprepared for the unique challenges of special needs trust administration and has authority to establish or transfer to a Master Trust
  • When an ABLE Account is established and a third-party wants to ensure ongoing annual contributions are made to the ABLE Account even after the third-party dies

 

 Pooled Medicaid Payback Trust

A Pooled Medicaid Payback Trust allows a parent, grandparent, guardian, court, or individual with a disability (known as the Beneficiary) to establish a trust to be funded with the Beneficiary’s own money for the Beneficiary’s supplemental needs without jeopardizing eligibility for government benefits. Because it is funded with the Beneficiary’s own funds, it is a first-party or self-funded trust.  Examples of funding sources include an inheritance, gift, personal injury settlement, back payments from Social Security, or even lottery winnings. A Pooled Medicaid Payback Trust has two options to distribute the balance when the Beneficiary dies.  The first option is to repay all state Medicaid agencies for the Medicaid-covered services provided to the Beneficiary.  If there is a balance remaining after payment of the Medicaid claims, the funds will be distributed to the individuals, charities, or other entities identified in the Joinder Agreement.  The second option is to leave all of the assets remaining at the Beneficiary’s death to CFMF or one of our nonprofit partners.

CFMF will accept a Pooled Medicaid Payback Trust funded with any amount, but the combined contributions to the Trust must reach $5,000 before a distribution can be made.  Once the trust balance reaches $5,000, it can be distributed and there is no requirement to maintain a $5,000 balance.  Trusts that are initially funded with less than $5,000 are referred to as “Roll-In Pooled Medicaid Payback Trusts.”

Common examples of when a Pooled Medicaid Payback Trust is used:

  • Someone desiring a professional trustee and trust advisor who has demonstrated experience with special needs trust administration
  • A minor or adult who receives a personal injury settlement and is a Medicaid or SSI recipient
  • When a person receiving Medicaid sells an exempt asset, like a home, and wants to transfer the funds to remain eligible for Medicaid without receiving a penalty
  • An individual with a disability receiving a back payment from Social Security
  • An individual directly receiving an inheritance
  • A person with a disability accruing assets, such as savings or wages, and realizing that he or she cannot have assets in excess of $2,000
  • A person seeking to establish an ABLE Account but realizes that he or she has excess assets and must decide on where to place the balance without jeopardizing benefits