Updated: January 6, 2023
For many with a serious disability, health insurance is a major consideration and it becomes crucial to get coverage under Medicaid for many reasons.
If it is a living trust, it can be revocable and you can be a trustee and name a successor. If the trust is created at your death, it is best to name a trustee who knows the beneficiary such as a surviving parent, sibling, or other close family member or friend. It is best if the trustee and/or successor trustee is not at significant risk of dying before your beneficiary. The trustee may need additional qualities to care for a disabled beneficiary that may include:
The duties of the trustee are similar to all trusts, but additional responsibilities may include:
There are specific items the trustee can use the funds for that will not interfere with your beneficiary’s Medicaid and SSI benefits.
The trust ends when it is no longer needed, including when the:
Special needs trusts can be designated as first-party and third-party depending upon whose assets funds the trust, yours or your beneficiary’s.
A first-party or self-settled special needs trust will be needed if a person with a disability inherits money or property outright, receives a court settlement from a lawsuit, gets alimony, or has retirement funds. They may be used when a person without a prior disability owns assets and later become disabled. They may be referred to as Medicaid Payback Trusts, OBRA (Omnibus Budget and Reconciliation Act) ’93 Trusts, and d4A or d4C Trusts.
Although third-party special needs trusts are predominantly created by parents, grandparents or other legal guardians, federal law also authorizes a mentally and legally competent beneficiary to establish an individual first-party trust for themselves without court involvement.
A third-party special needs trust is usually created and funded by you to assure that your loved one with special needs is provided for. Although most likely set up when you are the parent of the beneficiary, you could be their grandparent, sibling, or any other person wishing to provide for them.
A stand-alone third-party special needs living trust is created by you and used by the beneficiary while you are alive.
Pooled special needs trusts are established and administered by a non-profit organization for the benefit of multiple beneficiaries and are not part of an individual or family estate plan