When a trust is created, the person who “establishes” it (usually that means signing the instrument and depositing the funds) is called the “settlor.” Medicaid and SSI only allow certain actors in the life of the beneficiary to establish a trust that is exempt under those programs, meaning that the assets will not interfere with benefits.
It is very common for a trust to be created by an agent under a Durable Power of Attorney (DPOA). Regulations view the agent as being the beneficiary, for purposes of applying the settlor criteria. Another fiduciary who can act for beneficiary is a conservator. (In some states, guardians also can create trust, but not in Massachusetts.)
The Settlor must be:
- The beneficiary – him or herself
- A parent or grandparent of the beneficiary
- A guardian or conservator of the beneficiary’s estate
- A court
In order for an agent or a conservator to create a trust, however, the DPOA or, in the case of a conservator, the decree authorizing the trust, must have a clear provision granting authority to the fiduciary to create the trust. If the authority is not adequate, Community Trust may end up holding funds that it does not have legal right to own, because the settlor did not have authority to create the trust. Therefore, Community Trust always asks to review the DPOA or the decree before it can accept the trust.
Any DPOA or court decree that will be relied upon should be sent ahead of time to Community Trust for review. If there are any problems with the documents, we work with the beneficiary and/or responsible parties to correct them, or to find work‐arounds if necessary.
In addition to these criteria, age is a factor under the regulations. Individual Special Needs Trusts are available only to persons age 64 or younger. Persons of any age can join the Pooled Trust program. It is important to be aware of these age limits, especially for those who may be considering a disability trust while still under the age of 65. Acting before turning 65 will keep open the option of an individual Special Needs Trust. Only the Pooled Trust option will remain after the individual turns 65.