SBO Trust Part 2: Meaning Revealed

By Doug Chalgian on July 31, 2020

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UPDATE: The start date for the policy discussed in this post was moved until at least March 1, 2021.


Just a month ago I wrote about new DHHS policy re the treatment of “solely for the benefit” trusts (aka, “SBO trusts”) in Medicaid planning.  [See SBO Trusts Targeted Again].  As discussed at the time, the proposed policy was confusing and vague.

Now the proposed policy discussed in that post has been revised, and the meaning is revealed.

The bottom line is:

Under this new proposed policy an SBO Trust for as Spouse is divestment.  And that is true even though transferring assets to “another” solely for the benefit of a community spouse would not be divestment.  Same definition of “solely for the benefit” applies.  Which seems to mean that you can still do the same thing, just call it something else.

I’m serious.  Click here to read it for yourself.

Helpfully, the new proposed policy includes the proposed BEM language. [As an aside, I will thank our own David Shaltz for that.  He has been writing DHHS since the first policy announcement, asking for clarification.  This is apparently their response to David’s inquiries.]

I’m sure better minds will improve and elaborate, but to me it seems like the same type of planning will continue with these cautions/changes:

  • Transfers must be to “another” person (who is not called a “Trustee”);
  • There still has to be a writing describing this arrangement, but the writing will be called an “arrangement” or “written arrangement” as opposed to a trust.

To those that created this policy, it presumably makes no never mind that a written arrangement of this type would, under any reasonable construction, be deemed a trust agreement.  But fine.  As I often tell clients (and other lawyers who care to listen), there are many examples in Medicaid planning where policy is disconnected from logic or reason.  When that occurs, we simply follow policy and stay away from the invitation to try to make sense of it.  That will be my approach to this change as well.

Implementation of the new policy has been moved back to November 1, 2020.

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mm By: Doug Chalgian
Doug Chalgian

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