Special Needs Trusts
A Trust is an entity that is set up to manage assets for the benefit of someone or thing. A Special Needs Trust (SNT) is an irrevocable type of trust that holds assets for the beneficiary, uses the assets for the beneficiaries “special needs” and allows the disabled beneficiary n to maintain his or her eligibility for public assistance benefits, despite having assets that would otherwise make the person ineligible for those benefits.
“Special needs” refers to the requisites for maintaining the beneficiary’s good health, comfort, safety, and welfare when, in the discretion of the Trustee, those requisites are not being provided for by any county, state, federal, or other governmental agency, or by any person or persons with a legal obligation to support the beneficiary. “Special needs” include, but are not limited to, medical and dental care, special equipment, programs of training, education, rehabilitation, travel needs and recreation not provided for or reimbursed by public benefits.
There are two types of SNTs: First Party and Third Party.
1. First Party SNT
First party SNTs are funded with assets that belong to the trust beneficiary or to which the beneficiary was legally entitled (e.g., assets from an award or settlement, etc.). These trusts must include federal and state provisions, which require notice and payback to the State upon the death of the trust beneficiary or earlier termination of the trust. The Department of Health Care Services (DHCS) is required to recover up to an amount equal to the total medical assistance paid by Medi-Cal on the trust beneficiary’s behalf on any assets left in the trust at the end of the beneficaries life and/or at termination of the trust.
First party SNTs are classified as either (d)(4)(A) SNTs which are established under 42 USC 1396p(d)(4)(A) or Pooled SNTs established under 42 USC 1396p(d)(4)(C):
2. Third Party SNT
Third party SNTs are funded with assets belonging to a person other than the trust beneficiary, and to which the beneficiary never had possession or legal interest. This type of trust is set up by a third party, such as a parent of a disabled individual, either during the third party’s life (e.g., parent’s life) or through their own Will or Trust (e.g., parent’s Will or Trust). Third party trusts are not subject to recovery by the Department of Health Care Services (DHCS).
“Special needs” refers to the requisites for maintaining the beneficiary’s good health, comfort, safety, and welfare when, in the discretion of the Trustee, those requisites are not being provided for by any county, state, federal, or other governmental agency, or by any person or persons with a legal obligation to support the beneficiary. “Special needs” include, but are not limited to, medical and dental care, special equipment, programs of training, education, rehabilitation, travel needs and recreation not provided for or reimbursed by public benefits.
There are two types of SNTs: First Party and Third Party.
1. First Party SNT
First party SNTs are funded with assets that belong to the trust beneficiary or to which the beneficiary was legally entitled (e.g., assets from an award or settlement, etc.). These trusts must include federal and state provisions, which require notice and payback to the State upon the death of the trust beneficiary or earlier termination of the trust. The Department of Health Care Services (DHCS) is required to recover up to an amount equal to the total medical assistance paid by Medi-Cal on the trust beneficiary’s behalf on any assets left in the trust at the end of the beneficaries life and/or at termination of the trust.
First party SNTs are classified as either (d)(4)(A) SNTs which are established under 42 USC 1396p(d)(4)(A) or Pooled SNTs established under 42 USC 1396p(d)(4)(C):
- A (d)(4)(A) SNT can only be established for a disabled individual under the age of 65. Such trust can be established by the disabled individual, their parent(s) or guardian(s), or by a Court and must be managed by a trustee that is someone other than the disabled beneficiary.
- A Pooled Trust can be established for a disabled individual of any age and must be established and managed by a non-profit association as trustee. A separate account is maintained for each beneficiary, but funds are “pooled” together for investment purposes.
2. Third Party SNT
Third party SNTs are funded with assets belonging to a person other than the trust beneficiary, and to which the beneficiary never had possession or legal interest. This type of trust is set up by a third party, such as a parent of a disabled individual, either during the third party’s life (e.g., parent’s life) or through their own Will or Trust (e.g., parent’s Will or Trust). Third party trusts are not subject to recovery by the Department of Health Care Services (DHCS).