Special Trusts for Disabled and 65+

WHO SHOULD CONSIDER THEM?

Parents, grandparents, family caregivers of a loved one with a disability

  • A disabled child (who is receiving public benefits) receives an inheritance
  • A disabled child (who is receiving public benefits) receives proceeds from a personal injury settlement or suit
  • A disabled adult in a skilled nursing facility (who is receiving public benefits) receives an inheritance
  • A disabled adult in a skilled nursing facility (who is receiving public benefits) receives proceeds from a personal injury settlement or suit

Persons who are responsible for caring for a loved one who is disabled and/or on Medicaid or receiving Social Security SSI government public benefits programs can use special needs trusts in their estate planning to leave money to the disabled loved one and keep benefits eligibility in place at the same time.A Third Party Special Needs Trust should be used to preserve a disabled intended beneficiary’s eligibility for Medicaid or Social Security SSI government public benefits

WHEN TO USE A SPECIAL NEEDS TRUST

The Federal law allows specially defined trusts (Special Needs Trusts) that allow a disabled person to set aide funds to pay for those things the public benefits such as Medicaid and Supplemental Security Income (SSI) do not pay for.

The Federal law is located at United States Code Chapter 42 Section 1396(p)(d)(4)(A) and 1396(p)(d(4)(c).

Pooled Special Needs Trusts are still a valid planning tool in Florida for those seeking Medicaid eligibility as of May 2015.

Mr. Glenn uses Special Needs Trusts in planning for disabled individuals and seniors when it comes to Medicaid planning.

There are three (3) types of Special Needs Trusts Third Party Special Needs Trusts

This is a great way to leave an inheritance to a disabled loved who is on Medicaid or SSI. This is a trust set up by a relative or friend of the disabled person. The trust allows payment for anything Medicaid or social security (SSI) benefits does not pay for or provide. Primarily used for parents or grandparents of a disabled child or grandchild. An advantage to this type of trust. There is no Medicaid payback provision required for these trust. Upon the disabled beneficiary passing away, the remaining trust assets can go to another beneficiary named in the trust or estate plan of the person who set up the third party special needs trust.

Self Settled Special Needs Trust –

Often referred to as a 42 USC 1396p(d)(4)(A) Special Needs Trust

This trust is established with the funds of the disabled person. Primarily used in the context of personal injury or medical malpractice lawsuits. It must be established by a parent, grandparent, or legal guardian of the disabled person’s and ordered established by the courts.

The one caveat is that any State that provided or paid for any benefits the recipient received, on the death of the recipient has a lien on any funds still remaining in that individuals pooled trust account. The lien is for an amount up to the amount of services paid for by Medicaid on behalf of the recipient during his/her lifetime.

The benefit is that Medicaid’s lien is for far less than what the individual would have paid for those same benefits had he/she had to private pay for those same benefits/services during his or her lifetime. The discount is believed to be approximately 35-45% depending on the services the recipient was receiving.

Pooled Special Needs Trust

Often referred to as a 42 USC 1396p(d)(4)(c) Pooled Special Needs Trust

As of May 2015, a pooled special needs trust can still be used in Florida as a Medicaid planning tool to set aside assets of a Medicaid applicant who is over 65 and is seeking Medicaid eligibility for nursing home benefits or assisted living facility waivers.

Funds placed in the pooled trust are not counted for Medicaid eligibility purposes.

These trusts are established with an authorized 501(c)(3) non-profit organization. These 501(c)(3) organizations are highly regulated and monitored to ensure the activities of these organizations comply with federal non-profit accounting laws and regulations and also federal pooled trust laws. Typically, funds in the pooled trust are invested in very low risk conservative investments.

A Medicaid applicant can set up a pooled trust with one of these organizations via a joinder agreement. A separate account is established for each individuals pooled trust. The Medicaid recipient can use the funds in his/her pooled trust account for anything Medicaid or social security benefits does not pay for.

The one caveat is that any State that provided or paid for any benefits the recipient received, on the death of the recipient has a lien on any funds still remaining in that individuals pooled trust account. The lien is for an amount up to the amount of services paid for by Medicaid on behalf of the recipient during his/her lifetime.

The benefit is that Medicaid’s lien is for far less than what the individual would have paid for those same benefits had he/she had to private pay for those same benefits/services during his or her lifetime. The discount is believed to be approximately 35-45% depending on the services the recipient was receiving.


Gregory G. Glenn, Esq. is a Certified Elder Law Attorney by the National Elder Law Foundation. He has practiced elder law since 1995. Prior to law school Mr. Glenn worked as a management consultant at the Big Eight accounting firm of Coopers & Lybrand, CPA’s and also at Dunn & Roth, CPA’s as a staff accountant. He has his law degree from MSU and completed his legal studies at the University of Miami School of law. His focus in elder law is on estate planning for the over 65, disability planning, probate, and Medicaid eligibility planning. His office is in Boynton Beach, Florida.