When an injured party received money as a result of a tort action, the settlement or award may jeopardize his or her public benefits.

Requirements
• Trust funded with assets of the individual.

• Individual must be less than 65 years of age at the time the trust is funded.

• Individual must be disabled.

A parent, grandparent, legal guardian of the individual, or a court must establish trust. Often established by the court in a tort setting.

Any state that paid medical assistance on behalf of the individual must be reimbursed from any amounts remaining in the trust upon the death of the individual.

Reimbursement must be up to an amount equal to the total medical assistance paid on behalf of the individual.

Trust must be irrevocable.

Disability: as contained in the Social Security Act:

An individual shall be considered to be disabled for purposes of this subchapter if he is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months (or, in the case of a child under 18, if he suffers from any medically determinable physical or mental impairment of comparable severity).

Persons over age 65:
May avail themselves of pooled income trusts, which are est. by non-profit associations.

When drafted properly a SNT may enable a person under a physical or mental disability, or an individual with a chronic or acquired illness, to hold in Trust, an unlimited amount of assets, without those assets being considered countable assets for purposes of qualification for governmental benefits that are based upon need.

Governmental benefits include:
• Supplemental Security Income (SSI)
• Medicaid (Medical etc, depending upon state)
• Expenses of vocational rehabilitation
• Subsidized housing
• Other benefits traditionally provided to persons who are impoverished

The trust funds cannot be available to pay for items that public assistance programs can pay for. The assets and income of the Trust are to supplement the assistance otherwise available to such person and pay for extra items – travel, entertainment, personal care and grooming, travel for companions, clothing – whatever will make his/her life more enjoyable but that is not paid for by basic public assistance.

The trust specifies that it continue as long as the beneficiary lives or the money lasts, and upon the death of the developmentally disabled person, goes to such person or persons setting up the trust specifies.

Financial Situation:
For SNT person may be deemed impoverished of assets are less than $2,000. SNY provides for supplemental and extra care ever and above that which the government may provide for persons under medical or physical disabilities, chronic or acquired illnesses.

Statute: Omnibus Budget and Reconciliation Act 1993 (OMBR-93):

Authorized use of these trusts for people under 65 who would otherwise qualify by virtue of a disability for Social Security Benefits.

Social Security Operations manual also authorizes the use of SNTs to hold non-countable assets.

What is it?
• It is its own entity.
• Exists under its own Federal ID number issued by the IRS.
• Not linked to either the grantor’s or the beneficiaries’ Social Security Numbers.

Can’t I just leave money to the child’s brother or sister and ask that they look after their sibling? I trust them.
Leaving money to others can create a serious problem! Leaving nothing to your disabled child, or disinheriting that child, to preserve their eligibility for governmental benefits put those assets you intend to be used for that child’s benefit at risk.

The brother or sister may be faced with situations that make it too easy to use those funds for their own benefit, such as paying for their own child’s education, starting a business, a “hot” investment tip etc.”

The brother or sister may place this money at risk through no fault of their own through a divorce proceeding, a lawsuit, a bankruptcy etc.

Using a special needs trust guarantees that those funds will always be available to provide for the person under the disability or chronic illness and not for any other purpose.

Can I go to any lawyer to create my special needs trust?
Would you go to a podiatrist to treat your cold? If you are a person who desires to benefit an individual under a disability or chronic illness will be well advised to utilize the services of an attorney that focuses a practice in Special Needs issues.

A SNT can be easily invaded by governmental benefit sources and the trust can be easily invaded if the proper language is not utilized throughout the trust. One mistake can ruin your careful planning.

What type of language should specifically be used within the SNT?
At a minimum, the trust should state that it is intended to provide “supplemental and extra care” over and above that which the government provides. It should set forth clearly within the text of the trust that it is not intended to be a basic support trust. It should not contain a Crummey Clause.

A properly drafted trust should reference the Social Security Operations Manual and the relevant portions form within the manual that authorizes creation of the trust. The trust should also have language explaining the exception to the Omnibus Budget and Reconciliation Act (OBRA-93) provisions that authorizes the creation of the trust, and a copy of the relevant provisions from the United Stated Code (USC).

Is there an obligation to repay Medicaid, MediCal, or other State and Federal Funding Sources?
There MAY be repayment obligations in some situations. A properly drafted trust will address the issue concerning payback to such sources. The amendment requires that a payback be made to Medicare but only under specific circumstances.

A SNT that is funded by a parent or other third party will NOT be required to pay back Medicaid. The only assets within the trust that are subject to the repayment obligation are those assets that belonged to the disabled individual him or herself which were transferred into the trust.

It is not uncommon for a disabled individual to ask a court to direct certain assets into the trust before an individual owns them him or herself. In that event those assets may not be subject to the repayment provision of OBRA-93.b.

Who should serve as trustee?
You may select anyone who you feel would be able to handle the responsibilities of being trustee and who cares enough for the disabled or incapacitated person to stay involved with their life and knowledgeable of their needs and cares about their welfare.

A bank or other financial institution can be appointed trustee, however these trustees will take a percentage of the trust each year to compensate them for their services and often they have a minimum size the trust needs to be in order for them to accept a position as trustee.

Another drawback of appointing a bank as trustee is that it will be harder for that trustee to stay involved in the disabled or incapacitated person’s life and know when that person needs a special service or a new pair of shoes.

Another option is to have the funds invested in a pooled account trust. The parent or caregiver could have a hand in how the trust money is spent, but without the hassle.The pooled account trust will continue even after the parent or guardian’s death. The drawback of this option is that they are not offered in every state and any money remaining for the benefit of your loved one will not be distributed to your family members or as you direct, but will be used to help other persons with disabilities that participate in the pooled account.

If you can’t decide on one person, you may appoint co-trustees which could include a number of close family members or one or more family members and a financial planner. Many like this option since more than one person working as a team for the benefit of the disabled or incapacitated individual are likely to keep each other “in line”.

Upon the death of one of the trustees, this person may be replaced, however the remaining trustees would be familiar with the ongoing needs of the beneficiary and there will be no lapse in providing for that persons needs.

How do I choose a caring family member?
Look for someone that has been involved in the life of the disabled or incapacitated persons life and who has genuinely cared about your loved ones well being. A good sign of a caring individual is someone who has had the willingness to question or even speak out against the parents or guardians of your loved one and argue about what is in that persons’ best interests.
Someone who makes suggestions about where your loved one should live, programs they could attend, activities they would like are all great signs of someone who cares enough to speak up for your loved one. This person will most likely continue to be willing to speak out for the benefit of your loved one.

How do I choose a caring non-family member?
Look to those who know your loved one or is familiar with persons with disabilities or incapacitation similar to your loved one. Great people to ask would be a pastor or rabbi, or a special education teacher.What does the trustee of a special needs trust need to do?

This person should be available to monitor the disabled individual or incapacitated family member in order to accommodate his or her changing needs. The trustee should continue to check on the availability of programs and make certain that the disabled person benefits from everything to which he or she in entitled.

Since the trust is a separate entity, tax returns will need to be filed every year for the trust. The trust funds also need be prudently invested. These types of things will be the responsibility of the trustee to take care of effectively.

What if the disabled or incapacitated individual is my spouse?
There are a number of issues to consider if the disabled or incapacitated individual is your spouse.In most states you are generally not able to disinherit your spouse. If an effort is made to do so, the disinherited spouse has a right to elect against the will and obtain what is called the spouse’s statutory forced share of the estate of the deceased spouse. It can become complicated if the disinherited or incapacitated person signs a consent to be disinherited or is without capacity to decide whether to elect against the deceased person’s will or not. Generally the federal or state medical assistance laws do not allow one spouse to set up a trust for the benefit of the other spouse that would provide benefits to the incapacitated spouse, but still entitle the incapacitated spouse to be eligible to obtain assistance from governmental programs. Under most state laws, a trust created for the disabled or incapacitated individual or funded by that individuals or the individual’s spouse is not insulated from public assistance claims.

A trust can be set up with the individuals or the spouse’s assets and remain exempt if someone else sets up the arrangement.

Who can set up a special needs trust without making the disabled person ineligible for benefits?
The parent/brother/sister/son/daughter or any other third person can make a trust for a disabled or incapacitated person and provide that person with substantial benefits without causing them to be ineligible for public assistance.

Are there any limits on these trusts?
Depending on how the trust was set up, the remaining proceeds may go to the person or persons designated by the creator of the Trust or may have to be paid out for the reimbursement of public assistance program costs.

Under some state laws, such as in MN, special needs trusts will terminate if the beneficiary reaches age 65 and becomes a resident of a nursing home with no reasonable expectation of leaving.

What sort of access does the disabled person have to the trust funds?
The trustee has absolute discretion over the disbursements from the trust, which is a fundamental requirement to maintain eligibility for public benefits.

Although the trustee is to use the trust funds for the benefit of the disabled or incapacitated person, that person cannot tell the trustee how to spend the trust funds. If the beneficiary has too much say over the disposition of trust funds, the trust may become able to be invaded to pay for the disabled or incapacitated persons medical needs and make them ineligible for public assistance.

Although this may frustrate some disabled or incapacitated persons making them feel like children asking for an allowance, but the ability to work with a local trustee along with the financial benefits it provides, makes this a small inconvenience.

The beneficiary must understand that the trustee can purchase services or other things for the benefit of the disabled or incapacitated person, however the trustee cannot give the beneficiary any cash without disqualifying that beneficiary from SSI benefits. Giving the beneficiary more than $20 in cash will reduce SSI benefits dollar for dollar.

What affect does the receipt of Personal Injury Settlement Funds have on a disabled or incapacitated person?
The receipt of a personal injury settlement does not affect some benefits such as Social Security Disability Income (SSDI) or Medicare.

Other benefits, such as Supplemental Security Income (SSI) and the state version of Medicaid, will be terminated once a settlement is received unless the settlement is transferred to a Special Needs Trust.

What can trust money be used for?

• Uninsured medical and dental treatments
• Private rehabilitation
• Vitamins
• Schooling and recreation
  • Ball games
  • Camping trips
  • Rollerblades
  • Pizza parties
  • Travel companions

• Can help reach maximum potential during life and eventually pay for the person’s funeral expenses. All “extra” that would not be able to be afforded on poverty level SSI income and Medicaid alone.

Are there any other benefits of the Special Needs Trust?

This trust can be used as an estate planning/Medicaid planning tool for the disabled person’s parent or grandparent. Pursuant to 42 U.S.C. Section 1396p(c)(2)(B), the parent or grandparent can transfer money to a special needs trust without penalty for Medicaid eligibility purposes, so long as the beneficiary is under age 65.

Reminders:
If you decide to set up a special needs trust for the benefit of your loved one, you should remember to check your life insurance policies or other plans in which the person you are setting up the trust for may be named as beneficiary. You should make sure the beneficiary designation is changed to ensure that this person’s share flows to their special needs trust and not directly to them.

If you are going through the time and expense of setting up a special needs trust, be sure to let your friends and family members know. Anyone who would have the potential to leave an inheritance to the person you are setting up the special needs trust for need to know to leave these assets or funds to the special needs trust and not directly to this person. This would apply to direct cash gifts, stocks, bonds, real estate, jewelry, etc.

Public Benefits Basics:

Entitlements:

• Social Security:
  • Disabled child may be eligible for social security if a parent is eligible and the child’s disability began before age 22.
  • Benefits do not become payable until the eligible parent dies, retires, or becomes disabled.
  • Social Security is not affected by the child’s assets, but the child’s income may result in reduced benefits.
• Medicare:
  • Medicare is a federal health insurance program for people over 65 and people under 65 who have been receiving Social Security based on a disability for two or more years.

Benefits based on Need:

• Supplemental Security Income:
  • SSI is a federal program, administered by the states, and is based on need.
  • SSI is designated to provide a minimum level of monthly income to disabled individuals.
  • SSI is intended to pay for the beneficiary’s food, clothing, and shelter, but nothing more.
• State version of Medicaid:
  • Generally a federally funded program administered by the state.
  • Eligibility employs an income and resource test.
  • A disabled person eligible for SSI is automatically eligible for Medicaid, subject to the income and resource tests.

Basics of SSI eligibility Resources:
Exempt assets are not counted in determining eligibility and the beneficiary’s ownership of them will not jeopardize his/her SSI benefits. Resources exceeding $2,000 disqualifies the SSI beneficiary.

Exempt assets:
• A home, if beneficiary has an ownership interest and it serves as his/her principal residence
• Household goods
• Special medical equipment is excluded without a dollar limit
• One automobile or other vehicle including a wheelchair van
• Life insurance policies with cash surrender value, if the total face values amount to less than $1,500
• All term life insurance
• A burial plot or other burial space worth any amount