Death of the Beneficiary
Most of the trusts that Community Trust manages are Medicaid-payback trusts, which affects dramatically the administration of the trust after the beneficiary’s lifetime. Trusts that do not required Medicaid reimbursement are those that were created by an estate, or by a parent, grandparent or other benefactor who had no need of Medicaid or other public benefits for themselves. Because they did not have to worry about disqualifying asset transfers, these settlors were free to create a trust for the beneficiary during their own lifetime that did not default to the state when that beneficiary passed away.
Administration of Medicaid-Payback Trusts
If the trust requires Medicaid reimbursement, all funds remaining in the trust, with the exception of a very few allowed expenses, must be offered to the Medicaid program to reimburse medical benefits that were provided to individual during his or her lifetime. Only after reimbursing all Medicaid benefits can the remaining funds be passed on to others, such as a family member, charity or other “remainderman.”
The restrictions upon paying debts can be very harsh. For example, neither a pooled trust account, nor an SNT, can pay for the beneficiary’s funeral or burial expenses. Because of this strict limitation, Community Trust urges every beneficiary to purchase a pre-need funeral contract and other burial-related assets, before or immediately upon establishing a disability trust. We give notice to every new beneficiary of this important issue, and frequently we use assets of the trust to purchase funeral and burial-related assets.
Another severe (and sometimes very unfair) restriction is debts for services provided during the days or weeks immediately prior to the passing of the beneficiary. This can include legal fees, private home health or Social Worker charges, and fees for other services that were provided in good faith with an expectation of payment. The trustee has no discretion to pay debts, no matter how justified, after the beneficiary has died. Community Trust urges all such providers to submit invoices for retainers to cover fees that might be incurred during a final billing cycle, in the event of an unexpected passing of the beneficiary.
Procedures
As soon as we learn that someone has died, Community Trust begins the process of closing the account. The normal steps for this process are—
- We will contact the town in which the beneficiary passed away for a copy of the death certificate, or one will be provided by a family member.
- We send notice, with a copy of the Death Certificate, to MassHealth, and to any other state Medicaid agency that we know or believe to have provided medical benefits to the beneficiary. We request a statement of the amount of the Medicaid claim against the remainder of the trust.
- As soon as we receive the amount of the Medicaid claim, we prepare a final accounting of the trust. If the Medicaid claim is greater than the balance of the account, we send a copy of the accounting to any remaindermen named in the trust, pay out the balance to the state, and close all trust accounts. If any amount remains for remainder beneficiaries, those distributions are paid as soon as all of the remaindermen have received the accounting and returned a signed Assent to us.
Medicaid programs have up to a year to give us final notice of the amount of any claims. Because of this entitlement, we cannot close the account within the year unless we can be sure that there are no outstanding or unknown Medicaid liabilities.
When all of the checks have cleared and the funds are disbursed, the trust accounts are closed, and the trust itself at that point is considered closed. Trust records are maintained for seven years after the trust is closed.
Order of Final Distributions for All Trusts: Closing Fee
Community Trust does not charge an application fee, unlike any other pooled trust program in Massachusetts. If there are any funds remaining in the account upon the beneficiary’s passing, Community Trust retains a $1,000 closing fee to cover all administrative expenses related to opening and closing the account.
Order of Final Distributions for Pooled Trusts: Retained Amount
The order of final distribution for pooled trust includes an amount that the non-profit trustee is permitted to retain for its charitable purposes under federal and state law. Community Trust limits this amount to not more than 15%, which is distributable prior to Medicaid reimbursement. Community Trust’s charitable work includes its support of public guardianship for the indigent, which has been a feature of its mission since the organization was established in 2014.
Community Trust retains a varying amount, depending upon how long the account existed:
Schedule of Trust-Retained Amounts
| Duration of Trust Prior to Death | Percentage Retained |
|---|---|
| Up to one year | 5% |
| More than one year, but less than two years | 10% |
| Two years or longer | 15% |
The trust-retained amounts are not cumulative. Only one percentage applies, based upon the number of years that the trust existed.
Amounts retained by Community Trust are added to an Endowment that was established in 2006 to support an Office of Public Guardian for Massachusetts. That work is continues through a collaboration with other public and private stakeholders, called the Massachusetts Guardianship Policy Institute, and recently has resulted in the opening of a pilot project through an affiliate, Public Guardian Services. For more information about how the Endowment is used, please visit www.guardianship.institute, or www.publicguardianservices.org.
Administration of Non-Payback Trusts
If the trust does not require Medicaid reimbursement, virtually none of the limits on paying for funeral, debts or taxes of the beneficiary apply. The order of distributions, and the heirs or other persons who receive the trust assets at death are provided by the trust instrument. The procedures for Community Trust in that case are much simpler:
- Prepare a final accounting, which includes the costs of final administration, debts, taxes and any funeral expenses. The amounts of final distributions required at death are included as “proposed distributions.”
- The final account is sent to all of those entitled to final distributions, called “remaindermen,” and upon receiving the Assents of all, the final distributions are mailed out.
- When all of the checks have cleared and the funds are disbursed, the trust accounts are closed, and the trust itself at that point is considered closed.
Trust records are maintained for seven years after the trust is closed.
