Using a Special Needs Trust

For disabled patients under 65 in need of Medicaid, a special needs trust can be an effective way to maintain Medicaid eligibility and preserve an inheritance or lawsuit settlement to enhance the patient’s standard of living.  Generally, parents or grandparents can set up a special needs trust for a disabled son or daughter which does not require a Medicaid pay back provision like that of self-settled trusts.  There are three main types of special needs trusts a person can use to protect assets:

1. The Special Needs Trust. This is a common trust used to protect lawsuit or insurance proceeds or inheritances for someone who is disabled and needs or may need long-term care. 
2. The Pooled Trust. This is similar to the special needs trust in that the same types of assets can be protected, but the pooled trust is established by a charity which runs and administers the trust for a number of disabled beneficiaries.
3. The Third-Party Special Needs Trust. This is often referred to as an “Amenities Trust,” and is often established by a parent or grandparent to leave assets in trust for the benefit of a disabled child or grandchild.  The trust funds can be used to cover those things not covered by government assistance, referred to as amenities.  Since a third party establishes it, the remainder in the trust can pass through to other heirs or beneficiaries at the death of the disabled beneficiary. 

See The Importance of Special Needs Trusts, Examiner, Sept. 29, 2014.