Special Needs Trusts are synonymous with “Supplemental Needs Trusts” (SNTs). An SNT can sometimes be set up for the maintenance of persons with a disability by complementing government benefits. They can be useful to receive inherited assets, settlement proceeds, and proceeds of compensation for criminal injuries, litigation or insurance settlements on behalf of a disabled person.
Prior to 1993, a person could have a trust set up for them self which would not be counted towards Medicaid maximum asset thresholds. Since that time a third party trust is required. There are plenty of restrictions which vary State by State as well. The Trust funds care which Medicaid does not cover.
Under 42 U.S.C. § 1396p(d)(4)(A), a Disabled Individual’s Trust will not be counted as a Medicaid asset even when it is funded with the applicant’s own assets. The requirements for the trust are that:
1. the individual must be under age 65 at the time the trust is created (and funded), and
2. disabled under the Social Security definition.
3. The trust must be for the "sole benefit" of the disabled individual.
4. The trust must be created by a parent, grandparent, guardian, or court.
5. Upon the death of the individual under exempted “self-settled” trusts, the State Medicaid agency must be reimbursed for the costs of the medical assistance which was provided by Medicaid during the disabled individual's lifetime. This is often called the “payback” provision.
Third party action is required in creating the trust. These types of special needs trusts are often established by a court on behalf of a disabled person as a part of or ancillary to a serious personal injury lawsuit.
Specifically sanctioned by 42 U.S.C. § 1396p(d)(4)(B) sanctions a type of Trust often referred to as a “Miller Trust”. Miller Trusts are used only in those States which impose an income cap on Medicaid long-term care eligibility.
42 U.S.C. § 1396p(d)(4)(C) authorizes Non-Profit Income Special Needs Trusts. A Pooled Income Trust is run by a nonprofit association, and a separate account is maintained for each individual beneficiary. All accounts are pooled for investment and management purposes. Exactly how assets are transferred and their disposition after individual beneficiary death varies from State to State.
The purpose of this article is to inform you of the existence of these solutions. If they appear to have potential benefit, you might consider further research and perhaps consulting an attorney if it makes sense.
Here are some links to further inform:
Elderlaw Answers: http://www.elderlawanswers.com/elder_info/elder_article.asp?id=2742#6
World Institute on Disability: http://wid.org/center-on-economic-growth/access-to-assets/fact-sheets/special-needs-or-supplemental-needs-trusts
National Alliance on mental Illness: http://www.nami.org/Blogs/NAMI-Blog/May-2015/10-Things-You-Must-Know-about-the-ABLE-Act
Copyright 2012, AGIS Network, Inc.