| As the average life span of our population continues to | | | | A. The trust must contain the assets of a disabled |
| increase, and the elderly and disabled live longer than | | | | individual (of any age); |
| ever before, attorneys are challenged to properly | | | | B. The trust must be established and managed by a |
| protect them. The United States government provides | | | | nonprofit association; wherein, for the purposes of |
| financial assistance through Medicaid and Supplemental | | | | investment management, the assets are pooled but |
| Security Income (SSI) to some extent, but it is rarely | | | | wherein a separate account is maintained for each |
| sufficient to meet all the needs of the recipient. The | | | | beneficiary; |
| use of a Special Needs Trust (SNT) is an excellent | | | | C. The trust must pay the state up to an amount equal |
| means to care for and protect the elderly and | | | | to the total Medicaid benefits received if the |
| handicapped in addition to and in conjunction with their | | | | beneficiary keeps assets in an account not retained by |
| government benefits. (As always, please consult with | | | | the trust; and |
| a qualified Florida elder law attorney before pursuing | | | | D. The trust must be established by a parent, |
| any course of action.) | | | | grandparent, legal guardian, court or individual. Pooled |
| Ordinarily the attorney seeks to draft a SNT that will | | | | trusts are less commonly used and harder to |
| not subject the government benefits recipient to an | | | | administer than (d)(4)(A) trusts which are outlined in |
| ineligibility period or reduce the benefits that the | | | | greater detail next. |
| programs provide. In some circumstances however, | | | | 42 U.S.C *1396(d)(4)(A) sets forth the most common |
| the recipient's amount of government benefits will be | | | | form of special needs trust. This trust excepts form |
| reduced as long as essential elements of the benefits | | | | the attribution rule a SNT containing assets of a |
| are not eliminated. For example, an SSI recipient may | | | | disabled beneficiary provided that: |
| suffer reduced monthly SSI benefits but gain full | | | | (i) The beneficiary is under age 65 when the SNT is |
| Medicaid coverage for medical needs which is a higher | | | | funded; |
| financial aid. All SNTs must conform to appropriate | | | | (ii) The SNT is established by the parent, grandparent, |
| statutory and regulatory requirements to assure the | | | | legal guardian, or court, not the beneficiary. |
| ongoing SSI/Medicaid eligibility of a disabled or elderly | | | | (iii) The trust requires the trustee to reimburse Medicaid |
| individual. | | | | for the cost of services from any principal and income |
| The Special Needs Trust may be either an inter-vivos | | | | remaining in the trust at the beneficiary's death. HCFA |
| or testamentary trust fund, and may be either | | | | 64 |
| self-settled or created by a third party. The type of | | | | It is helpful to define and comment on some of the |
| trust depends upon whose money funds the trust and | | | | above (d)(4((A) requirements mentioned above. The |
| the age and circumstances of the beneficiary. | | | | (d)(4)(A) trust is almost always settled with the |
| There are basically three types of SNTs. One is a third | | | | disabled beneficiary's money and established by one |
| party created trust for a public benefits recipient. | | | | of the above individuals. Thus making these trusts also |
| Another is a third party created trust for a public | | | | fall under the third category above. The assets may |
| benefits recipient wherein the third party also seeks | | | | include structured settlement payments and lump sum |
| public benefits for him or herself. The last is a first | | | | settlements. The term disabled is defined in section |
| party or self-settled trust created for one's own | | | | 1614 (a) (3) of the Social Security Act, 42 U.S. C. |
| benefit. | | | | Section 1382 (c) (a) (3), as one who is already |
| In the SNT created by a third person for another who | | | | receiving SSI or Medicaid based upon disability |
| is already receiving public benefits, the donor wishes to | | | | because the Department will accept the previous |
| donate or bequeath assets to another individual | | | | disability determination. |
| without jeopardizing the individual's eligibility for public | | | | Alternatively, if one is not yet receiving SSI or Medicaid |
| benefits. In practice, this trust is used most frequently | | | | there will be an independent determination of disability. |
| when a parent establishes a trust for a disabled child | | | | The disabled individual must be under 65 years of age, |
| and when a spouse of a Medicaid recipient, or potential | | | | however the trust will continue to be exempt from the |
| Medicaid recipient, bequeaths some or all of their | | | | inclusion in the Medicaid eligibility determination after he |
| estate in trust for their spouse. | | | | or she turns 65 but the assets contributed to the trust |
| The next type of SNT adds a twist onto the above. In | | | | after age 65 will not qualify for an exemption. |
| this trust the donor wishes to donate or bequeath | | | | And lastly, because of the pay-back language, all |
| assets to a disabled child or individual under age 65 | | | | existing Medicaid liens should be paid first from the |
| and additionally the donor wishes to achieve Medicaid | | | | personal injury settlement prior to distribution. Other |
| eligibility for him or herself. | | | | liens may be deferred until the death of the disabled |
| Lastly, a SNT may be established by a disabled | | | | beneficiary and the termination of the trust. |
| individual seeking to save their own funds for their own | | | | There are many benefits of the SNTs. Although the |
| benefit. This trust is typically used in conjunction with a | | | | trustee is required to reimburse the state for past |
| lawsuit recovery to preserve the injured party's assets | | | | benefits upon the disabled individual's death, the heirs |
| for future needs. Creating and administering this | | | | are benefited by the deferral during the beneficiary's |
| self-settled trust is extremely challenging due to the | | | | life for the following reasons: |
| necessary correlation between trust requirements and | | | | |
| public benefits program rules. The program rules are | | | | 1. Despite the fact that the beneficiary may retain |
| often inconsistent and unclear regarding self-settled | | | | other public benefits through the use of the trust, only |
| trusts and the attorney must scrutinize each program's | | | | Medicaid requires reimbursement. |
| nuances in order to draft a self-settled trust which will | | | | 2. The states do not charge interest on the deferred |
| not jeopardize the many public benefits the donor | | | | payments; thus one is receiving the equivalent of an |
| recipient may be entitled to and will satisfy trust | | | | interest free loan. |
| statutory and regulatory requirements. | | | | 3. The state, as the administrator of the Medicaid |
| The controlling Federal law regarding SNTs is entitled | | | | program, will likely pay less for the services than the |
| OBRA 93, found at 42 U.S.C. *1396p. The definition of | | | | beneficiary would pay privately. |
| a trust under OBRA 93 is ...Realizing that the SNT | | | | 4. Some crucial Medicaid programs and services are |
| would be a valuable planning tool for disabled | | | | unavailable to private citizens. |
| individuals, Congress specifically exempted three kinds | | | | 5. If there is nothing left in the trust, Medicaid goes |
| of Special Needs Trusts from the OBRA 93 rules: | | | | away empty handed and they do not look further at |
| d4A, d4B and d4C trusts. These trusts are named for | | | | other assets or individuals. |
| the section of OBRA 93 that provides their exemption | | | | 6. There is no period of ineligibility for Medicaid caused |
| from OBRA's general trust rules. | | | | by the creation of the trust. The corpus is deemed |
| 42 U.S.C. *1396p(d)(4)(B) trusts are generally known as | | | | unavailable to the beneficiary. |
| Qualified Income Trusts which are a form of Special | | | | 7. SNTs enable the disabled individual to have his or |
| Needs Trust used in income cap states, such as | | | | her financial needs met during their lifetime. The |
| Florida, to allow a Medicaid applicant's income to be | | | | principal and income can be used for the beneficiary's |
| trusted and paid to the nursing home, thereby not | | | | benefit providing the items and services purchased do |
| disqualifying them from Medicaid. The d4B trust is | | | | not imping upon eligibility requirements for SSI and |
| relatively simple in application and because of it's unique | | | | Medicaid. |
| and narrow nature, this trust is not included under the | | | | 8. The establishment of a (d)(4)(A) trust should not |
| umbrella of the three basic types of SNTs mentioned | | | | affect the beneficiary's SSDI benefits nor veteran's |
| above. | | | | benefits, and it does not apply to persons on Medicare |
| 42 U.S.C. *396p(d)(4)( C) trusts, or pooled trusts as | | | | as they are at least 65 years of age. |
| they are commonly known, are a form of Self-Settled, | | | | There are many nuances and areas of special |
| Special Needs Trust for the public benefits recipient | | | | concern in the SNT drafting and implementation that |
| that are also exempted from general trust attribution | | | | are outside the scope of this article. The personal |
| rules. These trusts fall under the third category above. | | | | injury practitioner especially should consult with an |
| The pooled trust must meet strict criteria as set out | | | | attorney who practices in the SNT arena as soon as |
| below. | | | | possible before settlement is reached. |