Date of Adoption: March 5, 2001.

Purpose: The client eligibility rule on trusts has been rewritten to make it clearer and easier to understand. It is being relocated in new chapter 388-561 WAC, that includes new rules about annuities and life estates and how they affect a client's eligibility for medical assistance.

Citation of Existing Rules Affected by this Order: Repealing WAC 388-505-0595.

Statutory Authority for Adoption: RCW 74.04.050, 74.08.090, and 74.09.500.

Adopted under notice filed as WSR 00-17-126 on August 18, 2000.

Changes Other than Editing from Proposed to Adopted Version: WAC 388-561-0001 Definitions.

     "Annuity" means a policy, certificate or contract that is an agreement between one or more parties and an insurer or similar body, licensed and approved to do business in the jurisdiction in which the annuity is established. It buys the right to receive income in a specific amount for a specific time period. The annuity may be purchased at one time or over a set period of time and may be bought individually or with a group. It may be revocable or irrevocable.

     "Disbursement/distribution" means any payment from the principal or proceeds to the beneficiary or to someone on their behalf.

     "Irrevocable trust" means that the entity the legal instrument cannot be changed or cancelled terminated in any way by anyone.

     "Life estate" means an ownership interest in a property only during the lifetime of the person(s) owning the life estate. In some cases, the ownership interest lasts only until the occurrence of some specific event, such as remarriage of the life estate owner. A life estate owner does may not have the legal title or deed to the property, but may have rights to possession, use, income and/or selling their life estate interest in the property.

     "Pooled trust" means a trust that meets meeting all of the following conditions:

     (1) It was created on or after April 1, 1994;

     (2) (1) It contains funds of more than one disabled individual, combined for investment and management purposes;

     (3) (2) It is for the sole benefit of disabled individuals (as determined by SSA criteria) under sixty-five years old;

     (4) (3) It was created by the disabled individuals, their parents, grandparents, legal guardians, or by a court;

     (5) (4) It is managed by a nonprofit association with a separate account maintained for each beneficiary; and

     (6) (5) It contains a provision that upon the death of the beneficiary individual, for any funds not retained by the trust, the state will receive all amounts remaining in the individual's separate account up to the total amount of Medicaid paid on behalf of that individual.

     "Special needs trust" means a trust that meetsing all of the following conditions:

     (1) It was created on or after April 1, 1994;

     (2) (1) It is for the sole benefit of disabled individuals (as determined by SSA criteria) under sixty-five years old;

     (3) (2) It was created by the individual's parent, grandparent, legal guardian, or by a court; and

     (4) (3) It contains a provision that upon the death of the individual, the state will be the first beneficiary of all receive the amounts remaining in the trust up to the total amount of Medicaid paid on behalf of the individual.

     "Testamentary trust" means a trust created by a will from the estate of a deceased person. The beneficiary has no control over establishment of the trust and the trust fund is not given to the beneficiary, but is paid out according to the will. The department does not consider the trust as a resource (see WAC 388-470-0005) or asset to the beneficiary, but payments from the trust are considered income.

     "Trust" means legal title to property (such as a home, cash, stocks, or other assets) is given transferred to one party a trustee for the benefit of another party the grantor or another party. The department includes in this definition any other legal instrument similar to a trust. For annuities, refer to WAC 388-561-0200.

     "Trustee" means an individual, bank, insurance company, or any other entity (like a bank or insurance company) that manages and administers the trust for the beneficiary.

WAC 388-561-0100 Trusts.

     (1) A trust owned by a client, a client's spouse, or a client's legal dependent affects a client's eligibility for medical programs in the following ways: The department determines how trusts affect eligibility for medical programs.

     (2) The department disregards trusts established on or before April 6, 1986, for the sole benefit of a client who lives in an intermediate care facility for the mentally retarded (ICFMR).

     (3) For trusts established on or before August 10, 1993 the department counts the following:

     (a) If the trust was established by the client, client's spouse, or the legal guardian, the largest amount of money (payments) allowed to be distributed under the terms of the trust for the client if all of the following conditions apply:

     (i) The client could be the beneficiary of all or part of the payments from the trust;

     (ii) The distribution of payments is determined by one or more of the trustees; and

     (iii) The trustees are allowed discretion in distributing payments to the client.

     This applies whether or not:

     (iv) The trust is irrevocable;

     (v) The trustees actually used the discretion allowed by the trust; or

     (vi) (iv) The trust was established for purposes other than to establish eligibility for medical assistance.

     (b) If an irrevocable trust doesn't meet the description under subsection (3)(a) of this section then it is considered either:

     (i) The trust is a An unavailable resource if the client established the trust for a beneficiary other than the client or the client's spouse;

     (ii) The trust is a An available resource in the amount of the trust's assets that:

     (A) The client could access; or

     (B) The trustee of the trust distributes as actual payments to the client; and

     (B) (iii) T the department applies the transfer of asset rules of WAC 388-513-1365 for regulations concerning the transfer of assets.

     (c) If a revocable trust doesn't meet the description under subsection (23)(a) of this section:

     (i) The full amount of the trust is an available resource of the client if the trust was established by:

     (A) The client; or

     (B) The client's spouse, and the client lived with the spouse.; or

     (C) A person other than the client or the client's spouse only to the extent the client had access to the assets of the trust.

     (ii) Only the amount of the trust to which the client has access money actually paid to the client from the trust is an available resource of the client, if the when the trust was established by: a person other than the client or the client's spouse.

     (A) The client's spouse, and the client did not live with the spouse; or

     (B) A person other than the client or the client's spouse; and

     (C) Payments were distributed by a trustee of the trust.

     (iii) Only the amount of money actually paid to the client from the trust is an available resource when the trust was established by:

     (A) The client's spouse, and the client did not live with the spouse; or

     (B) A person other than the client or the client's spouse, and

     (C) Payments were distributed by a trustee of the trust. The department considers the funds a resource, not income.

     (4) For trusts established on or after August 11, 1993:

     (a) The department will considers a trust as if it were established by the client when:

     (i) The assets of the trust, as defined under WAC 388-470-0005, are at least partially from the client;

     (ii) The trust is not established by will; and

     (iii) The trust was established by:

     (A) The client or the client's spouse;

     (B) A person, including a court or administrative body, with legal authority to act in place of, or on behalf of, the client or the client's spouse; or

     (C) A person, including a court or administrative body, acting at the direction of or upon the request of the client or the client's spouse.

     (b) Only the assets contributed to the trust by the client are available to the client when part of the trust's assets were contributed by any other person.

     (c) The department will not look at does not consider:

     (i) The purpose for establishing a trust;

     (ii) Whether the trustees have, or exercise, any discretion under the terms of the trust;

     (iii) Restrictions on when or whether distributions may be made from the trust; or

     (iv) Restrictions on the use of distributions from the trust.

     (d) For a revocable trust established as described under (3a) of this section:

     (i) The full amount of the trust is an available resource of the client;

     (ii) Payments from the trust to or for the benefit of the client are income of the client; and

     (iii) Any payments from the trust other than payments described under (34)(d)(ii) of this section are a transfer of client assets.

     (e) For an irrevocable trust established as described under (3a4)(a) of this section:

     (i) Any part of the trust from which payment can be made to or for the benefit of the client is an available resource. When payment is made from such irrevocable trusts, we will consider the payments as:

     (A) Income to the client when payment is to or for the client's benefit; or

     (B) The transfer of an asset when payment is made to any person for any purpose other than the client's benefit;

     (ii) A trust from which a payment cannot be made to or for the client's benefit is a transfer of assets. For such a trust, the transfer of assets is effective the date:

     (A) The trust is established, or

     (B) The client is prevented from receiving benefit, if this is after the trust is established.

     (iii) The value of the trust includes any payments made from the trust after the effective date of the transfer.

     (45) The following trusts, established on or after August 11, 1993, are not considered available resources if they contain the assets of either:

     (a) A person sixty-four years of age or younger who is disabled as defined by SSI criteria (as described in WAC 388-503-0510) and the trust:

     (i) Is established for the sole benefit of this person by their parent, grandparent, legal guardian, or a court; and

     (ii) Stipulates that the state will receive all amounts remaining in the trust upon the death of the client, up to the amount of Medicaid spent on the client's behalf; or

     (b) A person regardless of age, who is disabled as defined by SSI criteria (as described in WAC 388-503-0510) and the trust is managed by a nonprofit association which:

     (i) Is managed by a nonprofit association which:

     (A) Maintains separate accounts for each trust beneficiary; and

     (B) (ii) May pool such separate accounts only for investment and fund management purposes; and

     (C) (iii) Stipulates that either:

     (A) tThe state will receive all amounts remaining in the client's trust account upon the death of the client, up to the amount of Medicaid spent on the client's behalf((.)); or

     (B) The funds will remain in the trust to benefit other disabled beneficiaries of the trust.

     (56) The department considers payments made from in subsection (45) above to be unearned income.

     (67) The department will only count income from trusts and not the principal if:

     (a) The beneficiary has no control over the trust; and

     (b) It was established with funds of someone other than the client, spouse or legally responsible person.

     (78) This section of WAC does not apply when a client establishes that undue hardship exists.

     (8) (9) WAC 388-513-1365 applies when the department determines that a trust or a portion of a trust is a transfer of assets.

WAC 388-561-0200 Annuities.

     An annuity owned by a client, a client's spouse, or a client's legal dependent affects a client's eligibility for medical programs in the following ways:

     (1) The department determines how annuities affect eligibility for medical programs.

     (1) (2) A revocable annuity is counted considered as an available resource.

     (23) The income received from an irrevocable annuity, meeting the requirements of this section, is counted considered in determining eligibility and the amount of participation in the total cost of care. The annuity itself is not counted as a resource or income.

     (34) For irrevocable An annuityies established on or after January May 1, 2001 or after will be considered an available resource unless it:

     (a) Is irrevocable;

     (a) (b) When the annuity iIs paid out in equal monthly amounts throughout the actuarial life expectancy of the annuitant;, the department counts the payments as income.

     (b) (c) When the annuity is paid out in any other way, the department counts the principal as an available resource Is issued by an individual, insurer or other body licensed and approved to do business in the jurisdiction in which the annuity is established; and.

     (c) (d) If the annuity is paid out other than in equal monthly payments, and will still be paid out within the actuarial life expectancy, in order for the annuity to be considered as income rather than a resource, a client may:

     (i) Change the irregular or lump sum payments to equal monthly payments throughout the actuarial life expectancy of the annuitant; or

     (ii) Allow the department to calculate and budget the payments as equal monthly payments throughout the actuarial life expectancy of the annuitant Names the department as the beneficiary of the remaining funds up to the total of Medicaid funds spent on the client during the client's lifetime. This subsection only applies if the annuity is in the client's name.

     (d) If the annuity is paid out in excess of the actuarial life expectancy of the annuitant, the excess amount beyond the life expectancy is a transfer of resources and the department will decide if there is a penalty.

     (i) In the case of long-term care benefits, there may be a period of ineligibility (see WAC 388-513-1365).

     (ii) (i) In the case of other medical programs, there may be ineligibility in the month of application.

     (5) For an annuity to be counted as income, the annuitant of an irrevocable annuity must be: An irrevocable annuity established on or after May 1, 2001 that is not scheduled to be paid out in equal monthly amounts, can still be considered an unavailable resource if:

     (a) The client (a) The full pay out is within the actuarial life expectancy of the client; and;

     (b) The spouse of the client; (b) The client:

     (c) The blind or disabled child of the client; or

     (d) A person designated to use the annuity for the sole benefit of the annuitant.

     (i) Changes the scheduled pay out into equal monthly payments within the actuarial life expectancy of the annuitant; or

     (ii) Requests that the department calculate and budget the payments as equal monthly payments within the actuarial life expectancy of the annuitant. The income from the annuity remains unearned income to the annuitant.

     (6) If an annuity has a joint owner (co-annuitant) or an irrevocable beneficiary, who must agree before the policy may be cashed, and refuses to agree, the department does not consider the annuity as available unless the joint owner or irrevocable beneficiary is the community spouse. In that case, the department considers the cash surrender value of the annuity as an available resource and count it toward the maximum community spouse resource allowance.

     An irrevocable annuity, established prior to May 1, 2001 that is scheduled to pay out beyond the actuarial life expectancy of the annuitant, will be considered a resource transferred without adequate consideration at the time it was purchased. A penalty period of ineligibility, determined according to WAC 388-513-1365, may be imposed equal to the amount of the annuity to be paid out in excess of the annuitant's actuarial life expectancy.

     (7) An annuity is subject to the transfer of asset rules (See WAC 388-513-1365) unless it:

     a. Is irrevocable;

     b. Is issued by an insurer or other body licensed and approved to do business in the jurisdiction in which the annuity is established;

     c. Generates an equal monthly payment of interest and principal (the original purchase price) which pays out the principal throughout the actuarial life expectancy of the annuitant; and

     d. Names the state of Washington's Department of Social and Health Services or its successor agency, as the beneficiary of funds remaining in the annuity, not to exceed the total of Medicaid funds spent on the client during the client's lifetime, if the client is single or is married and the annuity is in the client's name

     (7) An irrevocable annuity, established on or after May 1, 2001 that is scheduled to pay out beyond the actuarial life expectancy of the annuitant, will be considered a resource transferred without adequate consideration at the time it was purchased. A penalty may be imposed equal to the amount of the annuity to be paid out in excess of the annuitant's actuarial life expectancy. The penalty for a client receiving:

     (a) Long-term care benefits will be a period of ineligibility (see WAC 388-513-1365).

     (b) Other medical benefits will be ineligibility in the month of application.

     (8) The dollar amount of resources from an annuity transferred without adequate consideration equals the difference between what will be paid out to the annuitant within the expected lifetime (based on the actuarial tables) and the principal of the annuity (original purchase price). The period of ineligibility is determined according to WAC 388-513-1365 for long-term care (LTC).

     (8) An irrevocable annuity is considered unearned income when the annuitant is:

     (a) The client;

     (b) The spouse of the client;

     (c) The blind or disabled child of the client; or

     (d) A person designated to use the annuity for the sole benefit of the client, the client's spouse, or a blind or disabled child of the client.

     (9) An annuity is not considered an available resource when there is a joint owner, co-annuitant or an irrevocable beneficiary who will not agree to allow the annuity to be cashed, unless the joint owner or irrevocable beneficiary is the community spouse. In the case of a community spouse, the cash surrender value of the annuity is considered an available resource and counts toward the maximum community spouse resource allowance.

WAC 388-561-0300 Life estates.

     (1) A life estate owned by a client, a client's spouse, or a client's legal dependent affects a client's eligibility for medical programs in the following ways: The department determines how life estates affect eligibility for medical programs.

     (1) (2) A life estate is an excluded resource if when either of the following conditions apply:    

     (a) The life estate owner is the client, the life estate is for the client's home and the client is living in or expresses an intent to return to the home; or

     (b) It is property other than the home, which is essential to self-support or part of an approved plan for self-support; or

     (c) (b) It cannot be sold due to refusal of joint life estate owner(s) to sell.

     (2) (3) Only the client's proportionate interest in the life estate is considered if there is more than one owner of the life estate Remaining interests of excluded resources in subsection (2) may be subject to transfer of asset penalties under WAC 388-513-1365.

     (3) (4) A property owner, who transfers legal ownership to a property creating a life estate, is transferring a resource if the life estate cannot be excluded in subsection (1). Refer to WAC 388-513-1365 for transfer of resources Only the client's proportionate interest in the life estate is considered when there is more than one owner of the life estate.

     (4) (5) A person must receive fair market value (FMV) for the value of the property transferred when creating a life estate A client or a client's spouse, who transfers legal ownership of a property to create a life estate, may be subject to transfer-of-resource penalties under WAC 388-513-1365..

     (5) (6) If a person does not receive FMV for the property transferred, then the value of the uncompensated portion of the resource is combined with other non-excluded resources When the property of a life estate is transferred for less than fair market value (FMV), the department treats the transfer in one of two ways:.

     (a) For noninstitutional medical, the value of the uncompensated portion of the resource is combined with other nonexcluded resources; or

     (b) For institutional medical, a period of ineligibility will be established according to WAC 388-513-1365.

     (6) If the total in subsection (5) exceeds the resource standard (WAC 388-470-0005, 388-478-0070, and 388-478-0080) then:

     (a) For CN/MN medical programs, the client is ineligible during the month of transfer; or

     (b) For long-term care programs, a period of ineligibility will be established (see WAC 388-513-1365).

     a. The transfer of a resource without adequate consideration is combined with other resources, and

     b. The total value cannot exceed the resource standard; or

     i. For CN/MN medical applications, the client is ineligible during the month of transfer; or

     ii.i. For long-term care applications, a period of ineligibility will be established. (See WAC 388-513-1365.)

Number of Sections Adopted in Order to Comply with Federal Statute: New 0, Amended 0, Repealed 0; Federal Rules or Standards: New 0, Amended 0, Repealed 0; or Recently Enacted State Statutes: New 0, Amended 0, Repealed 0.

Number of Sections Adopted at Request of a Nongovernmental Entity: New 0, Amended 0, Repealed 0.

Number of Sections Adopted on the Agency's Own Initiative: New 4, Amended 0, Repealed 1.

Number of Sections Adopted in Order to Clarify, Streamline, or Reform Agency Procedures: New 4, Amended 0, Repealed 1.

Number of Sections Adopted Using Negotiated Rule Making: New 0, Amended 0, Repealed 0; Pilot Rule Making: New 0, Amended 0, Repealed 0; or Other Alternative Rule Making: New 4, Amended 0, Repealed 1. Effective Date of Rule: May 1, 2001.

March 5, 2001

Bonita H. Jacques, Chief

Office of Legal Affairs

     "Annuity" means a policy, certificate or contract that is an agreement between two parties in which one party pays a lump sum to the other, and the other party agrees to guarantee payment of a set amount of money over a set amount of time. The annuity may be purchased at one time or over a set period of time and may be bought individually or with a group. It may be revocable or irrevocable. The party guaranteeing payment can be an:

     (1) Individual; or

     (2) Insurer or similar body licensed and approved to do business in the jurisdiction in which the annuity is established.

     "Beneficiary" means an individual(s) designated in the trust who benefits from the trust. The beneficiary can also be called the grantee. The beneficiary and the grantor may be the same person.

     "Designated for medical expenses" means the trustee may use the trust to pay the medical expenses of the beneficiary. The amount of the trust that is designated for medical expenses is considered an available resource to the beneficiary. Payments are a third party resource.

     "Disbursement" or "distribution" means any payment from the principal or proceeds of a trust, annuity, or life estate to the beneficiary or to someone on their behalf.

     "Discretion of the trustee" means the trustee may decide what portion (up to the entire amount) of the principal of the trust will be made available to the beneficiary.

     "Exculpatory clause" means there is some language in the trust that legally limits the authority of the trustee to distribute funds from a trust if the distribution would jeopardize eligibility for government programs including Medicaid.

     "Grantor" means an individual who uses his assets or funds to create a trust. The grantor may also be the beneficiary.

     "Income beneficiary" means the person receiving the payments may only get the proceeds of the trust. The principal is not available for disbursements. If this term is used, the principal of the trust is an unavailable resource.

     "Irrevocable" means the legal instrument cannot be changed or terminated in any way by anyone.

     "Life estate" means an ownership interest in a property only during the lifetime of the person(s) owning the life estate. In some cases, the ownership interest lasts only until the occurrence of some specific event, such as remarriage of the life estate owner. A life estate owner may not have the legal title or deed to the property, but may have rights to possession, use, income and/or selling their life estate interest in the property.

     "Principal" means the assets that make up the entity. The principal includes income earned on the principal that has not been distributed. The principal is also called the corpus.

     "Proceeds" means the income earned on the principal. It is usually interest, dividends, or rent. When the proceeds are not distributed, they become part of the principal.

     "Pooled trust" means a trust meeting all of the following conditions:

     (1) It contains funds of more than one disabled individual, combined for investment and management purposes;

     (2) It is for the sole benefit of disabled individuals (as determined by SSA criteria);

     (3) It was created by the disabled individuals, their parents, grandparents, legal guardians, or by a court;

     (4) It is managed by a nonprofit association with a separate account maintained for each beneficiary; and

     (5) It contains a provision that upon the death of the individual, for any funds not retained by the trust, the state will receive all amounts remaining in the individual's separate account up to the total amount of Medicaid paid on behalf of that individual.

     "Revocable" means the legal instrument can be changed or terminated by the grantor, or by petitioning the court. A legal instrument that is called irrevocable, but that can be terminated if some action is taken, is revocable for the purposes of this section.

     "Special needs trust" means a trust meeting all of the following conditions:

     (1) It is for the sole benefit of a disabled individual (as determined by SSA criteria) under sixty-five years old;

     (2) It was created by the individual's parent, grandparent, legal guardian, or by a court; and

     (3) It contains a provision that upon the death of the individual, the state will receive the amounts remaining in the trust up to the total amount of Medicaid paid on behalf of the individual.

     "Testamentary trust" means a trust created by a will from the estate of a deceased person. The trust is paid out according to the will.

     "Trust" means property (such as a home, cash, stocks, or other assets) is transferred to a trustee for the benefit of the grantor or another party. The department includes in this definition any other legal instrument similar to a trust. For annuities, refer to WAC 388-561-0200.

     "Trustee" means an individual, bank, insurance company or any other entity that manages and administers the trust for the beneficiary.

     "Undue hardship" means the client would be unable to meet shelter, food, clothing, and health care needs if the department applied the transfer of assets penalty.

[]

     (2) The department disregards trusts established, on or before April 6, 1986, for the sole benefit of a client who lives in an intermediate care facility for the mentally retarded (ICMR).

     (3) For trusts established on or before August 10, 1993 the department counts the following:

     (a) If the trust was established by the client, client's spouse, or the legal guardian, the maximum amount of money (payments) allowed to be distributed under the terms of the trust is considered available income to the client if all of the following conditions apply:

     (i) The client could be the beneficiary of all or part of the payments from the trust;

     (ii) The distribution of payments is determined by one or more of the trustees; and

     (iii) The trustees are allowed discretion in distributing payments to the client.

     (b) If an irrevocable trust doesn't meet the conditions under subsection (3)(a) then it is considered either:

     (i) An unavailable resource, if the client established the trust for a beneficiary other than the client or the client's spouse; or

     (ii) An available resource in the amount of the trust's assets that:

     (A) The client could access; or

     (B) The trustee distributes as actual payments to the client and the department applies the transfer of assets rules of WAC 388-513-1365.

     (c) If a revocable trust doesn't meet the description under subsection (3)(a):

     (i) The full amount of the trust is an available resource of the client if the trust was established by:

     (A) The client;

     (B) The client's spouse, and the client lived with the spouse; or

     (C) A person other than the client or the client's spouse only to the extent the client had access to the assets of the trust.

     (ii) Only the amount of money actually paid to the client from the trust is an available resource when the trust was established by:

     (A) The client's spouse, and the client did not live with the spouse; or

     (B) A person other than the client or the client's spouse; and

     (C) Payments were distributed by a trustee of the trust.

     (iii) The department considers the funds a resource, not income.

     (4) For trusts established on or after August 11, 1993:

     (a) The department considers a trust as if it were established by the client when:

     (i) The assets of the trust, as defined under WAC 388-470-0005, are at least partially from the client;

     (ii) The trust is not established by will; and

     (iii) The trust was established by:

     (A) The client or the client's spouse;

     (B) A person, including a court or administrative body, with legal authority to act in place of, or on behalf of, the client or the client's spouse; or

     (C) A person, including a court or administrative body, acting at the direction of or upon the request of the client or the client's spouse.

     (b) Only the assets contributed to the trust by the client are available to the client when part of the trust assets were contributed by any other person.

     (c) The department does not consider:

     (i) The purpose for establishing a trust;

     (ii) Whether the trustees have, or exercise, any discretion under the terms of the trust;

     (iii) Restrictions on when or whether distributions may be made from the trust; or

     (iv) Restrictions on the use of distributions from the trust.

     (d) For a revocable trust established as described under subsection (4)(a) of this section:

     (i) The full amount of the trust is an available resource of the client;

     (ii) Payments from the trust to or for the benefit of the client are income of the client; and

     (iii) Any payments from the trust, other than payments described under subsection (4)(d)(ii), are considered a transfer of client assets.

     (e) For an irrevocable trust established as described under subsection (4)(a) of this section:

     (i) Any part of the trust from which payment can be made to or for the benefit of the client is an available resource. When payment is made from such irrevocable trusts, we will consider the payments as:

     (A) Income to the client when payment is to or for the client's benefit; or

     (B) The transfer of an asset when payment is made to any person for any purpose other than the client's benefit;

     (ii) A trust from which a payment cannot be made to or for the client's benefit is a transfer of assets. For such a trust, the transfer of assets is effective the date:

     (A) The trust is established; or

     (B) The client is prevented from receiving benefit, if this is after the trust is established.

     (iii) The value of the trust includes any payments made from the trust after the effective date of the transfer.

     (5) Trusts established on or after August 11, 1993 are not considered available resources if they contain the assets of either:

     (a) A person sixty-four years of age or younger who is disabled as defined by SSI criteria (as described in WAC 388-503-0510) and the trust:

     (i) Is established for the sole benefit of this person by their parent, grandparent, legal guardian, or a court; and

     (ii) Stipulates that the state will receive all amounts remaining in the trust upon the death of the client, up to the amount of Medicaid spent on the client's behalf; or

     (b) A person regardless of age, who is disabled as defined by SSI criteria (as described in WAC 388-503-0510), and the trust is managed by a nonprofit association which:

     (i) Maintains separate accounts for each trust beneficiary; and

     (ii) May pool such separate accounts only for investment and fund management purposes; and

     (iii) Stipulates that either:

     (A) The state will receive all amounts remaining in the client's separate account upon the death of the client, up to the amount of Medicaid spent on the client's behalf; or

     (B) The funds will remain in the trust to benefit other disabled beneficiaries of the trust.

     (6) The department considers payments made from trusts in subsection (5) to be unearned income.

     (7) The department will only count income from trusts and not the principal, if:

     (a) The beneficiary has no control over the trust; and

     (b) It was established with funds of someone other than the client, spouse or legally responsible person.

     (8) This section does not apply when a client establishes that undue hardship exists.

     (9) WAC 388-513-1365 applies when the department determines that a trust or a portion of a trust is a transfer of assets.

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     (2) A revocable annuity is considered an available resource.

     (3) The income from an irrevocable annuity, meeting the requirements of this section, is considered in determining eligibility and the amount of participation in the total cost of care. The annuity itself is not considered a resource or income.

     (4) An annuity established on or after May 1, 2001 will be considered an available resource unless it:

     (a) Is irrevocable;

     (b) Is paid out in equal monthly amounts within the actuarial life expectancy of the annuitant;

     (c) Is issued by an individual, insurer or other body licensed and approved to do business in the jurisdiction in which the annuity is established; and

     (d) Names the department as the beneficiary of the remaining funds up to the total of Medicaid funds spent on the client during the client's lifetime. This subsection only applies if the annuity is in the client's name.

     (5) An irrevocable annuity established on or after May 1, 2001 that is not scheduled to be paid out in equal monthly amounts, can still be considered an unavailable resource if:

     (a) The full pay out is within the actuarial life expectancy of the client; and

     (b) The client:

     (i) Changes the scheduled pay out into equal monthly payments within the actuarial life expectancy of the annuitant; or

     (ii) Requests that the department calculate and budget the payments as equal monthly payments within the actuarial life expectancy of the annuitant. The income from the annuity remains unearned income to the annuitant.

     (6) An irrevocable annuity, established prior to May 1, 2001 that is scheduled to pay out beyond the actuarial life expectancy of the annuitant, will be considered a resource transferred without adequate consideration at the time it was purchased. A penalty period of ineligibility, determined according to WAC 388-513-1365, may be imposed equal to the amount of the annuity to be paid out in excess of the annuitant's actuarial life expectancy.

     (7) An irrevocable annuity, established on or after May 1, 2001 that is scheduled to pay out beyond the actuarial life expectancy of the annuitant, will be considered a resource transferred without adequate consideration at the time it was purchased. A penalty may be imposed equal to the amount of the annuity to be paid out in excess of the annuitant's actuarial life expectancy. The penalty for a client receiving:

     (a) Long-term care benefits will be a period of ineligibility (see WAC 388-513-1365).

     (b) Other medical benefits will be ineligibility in the month of application.

     (8) An irrevocable annuity is considered unearned income when the annuitant is:

     (a) The client;

     (b) The spouse of the client;

     (c) The blind or disabled child of the client; or

     (d) A person designated to use the annuity for the sole benefit of the client, client's spouse, or a blind or disabled child of the client.

     (9) An annuity is not considered an available resource when there is a joint owner, co-annuitant or an irrevocable beneficiary who will not agree to allow the annuity to be cashed, UNLESS the joint owner or irrevocable beneficiary is the community spouse. In the case of a community spouse, the cash surrender value of the annuity is considered an available resource and counts toward the maximum community spouse resource allowance.

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     (2) A life estate is an excluded resource when either of the following conditions apply:

     (a) It is property other than the home, which is essential to self-support or part of an approved plan for self-support; or

     (b) It cannot be sold due to the refusal of joint life estate owner(s) to sell.

     (3) Remaining interests of excluded resources in subsection (2) may be subject to transfer of asset penalties under WAC 388-513-1365.

     (4) Only the client's proportionate interest in the life estate is considered when there is more than one owner of the life estate.

     (5) A client or a client's spouse, who transfers legal ownership of a property to create a life estate, may be subject to transfer-of-resource penalties under WAC 388-513-1365.

     (6) When the property of a life estate is transferred for less than fair market value (FMV), the department treats the transfer in one of two ways:

     (a) For noninstitutional medical, the value of the uncompensated portion of the resource is combined with other nonexcluded resources; or

     (b) For institutional medical, a period of ineligibility will be established according to WAC 388-513-1365.

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     The following section of the Washington Administrative Code is repealed:

WAC 388-505-0595

Trusts.

© Washington State Code Reviser's Office