Section 120.347  Treatment of Trusts

a)         This Section applies to trusts established on or after August 11, 1993.

b)         A trust is any arrangement in which a grantor transfers property to a trustee or trustees with the intention that it be held, managed or administered by the trustee or trustees for the benefit of the grantor or designated beneficiaries.  A trust also includes any legal instrument or device that is similar to a trust, including an annuity.

c)         A person shall be considered to have established a trust if assets of the person were used to form all or part of the principal of the trust and the trust is established (other than by will) by any of the following:

1)         the person;

2)         the person's spouse; or

3)         any other person, including a court or administrative body, with legal authority to act on behalf of or at the direction of the person or the person's spouse.

d)         This Section does not apply to the following trusts:

1)         an irrevocable trust containing assets of a disabled person (as described in Section 120.314) under age 65 that is established by a parent, grandparent, legal guardian or court for the benefit of the disabled person, if language contained in the trust stipulates that any amount remaining in the trust (up to the amount expended by the Department on medical assistance) shall be paid to the Department upon the death of the person. This exclusion continues after the person reaches age 65 as long as the person continues to be disabled but any additions made by the person to the trust after age 65 will be treated as a transfer of assets under Section 120.387.  If the trust contains proceeds from a personal injury settlement, any Department charge (as described at 89 Ill. Adm. Code 102.260) must be satisfied in order for the trust to be excluded under this subsection; or

2)         an irrevocable trust containing assets of a disabled person (as described in Section 120.314) that is established and managed by a non-profit association that pools funds but maintains a separate account for each beneficiary that is established by the disabled person, a parent, grandparent, legal guardian or court for the benefit of the disabled person, if language contained in the trust stipulates that any amount remaining in the trust (up to the amount expended by the Department on medical assistance) that is not retained by the trust shall be paid to the Department upon the death of the person.  If the trust contains proceeds from a personal injury settlement, any Department charge (as described at 89 Ill. Adm. Code 102.260) must be satisfied in order for the trust to be excluded under this subsection (d).

e)         Subsections (f) and (g) of this Section apply to the portion of the trust attributable to the person and without regard to:

1)         the purpose for establishment of the trust;

2)         whether the trustee has or exercises any discretion under the trust; or

3)         whether there are any restrictions on distributions or use of distributions from the trust.

f)          For revocable trusts, the Department shall:

1)         treat the principal as an available asset;

2)         treat as income payments from the trust that are made to or for the benefit of the person; and

3)         treat any other payments from the trust as transfers of assets by the person (subject to the provisions of Section 120.387).

g)         For irrevocable trusts, the Department shall:

1)         treat as an available asset the amount of the trust from which payment to or for the benefit of the person could be made;

2)         treat as income payments from the trust that are made to or for the benefit of the person;

3)         treat any other payments from the trust as transfers of assets by the person (subject to the provisions of Section 120.387); and

4)         treat as a transfer of assets by the person the amount of the trust from which no payment could be made to the person under any circumstances (subject to the provisions of Section 120.387).  The date of the transfer is the date the trust was established or, if later, the date that payment to the person was foreclosed.  The amount of the trust is determined by including any payments made from the trust after the date that payment to the person was foreclosed.

(Source:  Amended at 22 Ill. Reg. 16291, effective August 28, 1998)