Special Needs Trusts
A Special Needs Trust or a Supplemental Needs Trust (SNT) improves a disabled person’s quality of life without endangering eligibility for government programs. The primary purpose of an SNT is to preserve Medicaid benefits which provide for needs other than food, clothing and shelter. An SNT allows a personal injury victim to receive a personal injury settlement/award without disqualification from SSI or Medicaid. Federal law allows money to be placed into an SNT, and that money is not a countable resource for purposes of qualifying for needs-based public assistance programs (See 42 U.S.C. 1396p). In order to create a Special Needs Trust, the personal injury victim must meet the definition of disability contained in the Social Security Disability definition (See 42 U.S.C. 1382c).
Types of Special Needs Trusts
Disabled person under age 65 (42 U.S.C. 1396p (d)(4)(A)): This trust is established with funds of the disabled person (typically a personal injury settlement/jury verdict) for the benefit of a disabled person who is under age 65 at the time of drafting the SNT. After the death of the beneficiary, then the law requires that any remaining funds are first used to repay any Medicaid lien due for benefits paid during the life time of the beneficiary. If there are any funds remaining, then they can be distributed to the heirs of the beneficiary according to the terms of the Trust.
Pooled Trust (42 U.S.C 1396p (d) (4) (C)): This trust is available to people under age 65 or over the age of 65 (over 65 can only participate in a pooled trust) at the time of drafting the SNT. This trust is an excellent vehicle for smaller settlements and it is available to the disabled. After the death of the beneficiary, any assets remaining in the Pooled Trust must remain in the Pooled Trust for the benefit of other disabled beneficiaries or must be paid to Medicaid.
Qualified Income Trust (42 U.S.C. 1396p (d)(4)(B): This trust is sometimes called a Miller Trust. It enables individuals to qualify for nursing home Medicaid even though the individual’s income exceeds the applicable income cap. One of the key benefits is that there is no Medicaid payback provision.
Third Party Special Needs Trust: This trust is established by someone else (parent, grandparent or the court) for the benefit of a disabled person in order to provide comfort and happiness during their lifetime. When establishing the trust, the Grantor makes a decision as to where any remaining funds go once that disabled person passes away.
If you do not have enough money to pay for all of your future medical care and support from your settlement and you are currently eligible for SSI/Medicaid, then you should consider establishing an SNT. Depending on state laws, the SNT can also be used to pay for life-enhancing needs, such as:
- Specialized rehabilitation services or educational services
- Personal care attendant
- Out-of-pocket medical expenses
- Transportation, maintenance, and insurance for vehicles
- Essential dietary needs
- Goods and services that add pleasure and quality of life (a vacation, a motor vehicle or even a home!)