A trust is defined to include any legal instrument of device that is similar to a trust but includes an annuity only to such extent and in such manner as Secretary specifies - 42 U.S.C. 1396 p(d)(6). Transmittal No. 64 describes how annuities are to be treated under the trust/transfer provisions (Section 3258.9B). Statute provides no guidance as to meaning of words "similar to a trust". HCFA has indicated in Transmittal No. 64 that the essence of this definition is a fiduciary relationship and includes entities such as escrow accounts, investment accounts and pension funds.
Therefore, a trust is any fiduciary relationship. Examples are escrow accounts, investment accounts, pensions funds and partnership agreements.
Many attorneys are drafting general partnership agreements, with a general partner making distributions to the other partners. The theory of the general partnership is a partnership is not an available resource. However, under the trust rules, the general partner has a fiduciary relationship to the other partners and any distributions by the general partner to the other partners is subject to the transfer rules. Therefore, since the general partnership is a trust, the result would be that the transfer by the general partner would be deemed a transfer subject to the five year rule (for example, for such treatment, see Post 184.)
It is noted that the trust rules do not apply to trusts established on or before October 10, 1993. However, Transmittal No. 64 indicates the earliest applicable date should be October 1, 1993.
Disclaimer: This article does not constitute legal advice and each person may have unique facts for which legal consultation may be necessary.
© April 2012, Post 192
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