Supplemental Needs Payback Trusts AKA "Special Needs Trust"
These trusts were first created by statute in 1993 (they were authorized under 42 USC § 1396 p (d)(4)(A) and are sometimes referred to as “d4A Trusts”). They are the same for SSI (Supplemental Security Income), or Medical Assistance (some states use MA, Medicaid, or have other names for this benefit). Since it is established by statute, these trusts must meet very specific criteria:
- The Trust is for the sole benefit of an individual who is disabled and under 65 years of age.
- The trust can now be established by the individual* (beneficiary), a parent, legal guardian, or a court.
- At the time of the beneficiary’s death, any residual funds are first used to pay back the state or states from which the beneficiary received Medical Assistance benefits.
How a Payback Trust Protects Benefits
This trust can be self-funded and can now be self-created (The Special Needs Trust Fairness Act 12/13/2016, Pub.L. 114 – 255). As a First Party Trust, it can be self-funded since funds belong to the individual and would otherwise make the individual ineligible for SSI or Medical Assistance (for example an inheritance, life insurance, a personal injury lawsuit settlement, etc.). Once the funds have been placed in this trust, they are no longer considered countable, available assets. This type of trust must be irrevocable and only the individual with disabilities can be a beneficiary. Other persons, including siblings, cannot be beneficiaries.
Trustee Responsibilities and Limitations
What Happens to the Funds After Death
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