An “individual trust” is what most people think of as a “Special Needs Trust” or a “Supplemental Needs Trust” (SNT), or simply as a “Disability Trust.” We call them “individual trusts” to distinguish them from “Pooled Trusts,” which are administered a little differently.
SNTs at Community Trust support a tremendous variety of individual beneficiaries. We work with families raising a child with disabilities; with young adults struggling to adapt to disabling injuries from a tragic accident; with men and women in middle age who are coping with very challenging physical and psychological disabilities; and with persons in their 60’s and 70’s who have begun to struggle with isolation and depression in the community, or with institutionalization when community supports are not enough.
As trustee, we often become part of a network of support that includes family members, care managers, medical providers, and others who are responsible for specific areas of well-being for the beneficiary. In addition to resources for supplemental support, the trust provides an umbrella of sound and compassionate management of those resources, which helps to keep the whole support system working.
Medicaid Payback: Exempt vs. Non-Exempt SNT
Community Trust manages two distinct types of individual SNTs: Those that require Medicaid payback, and those that don’t.
- If the person creating the trust expects to need public benefits—for example, when the beneficiary creates the trust himself or herself; when a court creates a settlement trust for a person disabled by injury; or when a parent or grandparent creates the trust for the beneficiary with an expectation of needing Medicaid or SSI benefits themselves—then the trust must pay back the Medicaid program before any other person or entity can receive any part of the remainder. This type of trust must meet statutory requirements, explained below. For this reason, it is often referred to as a “(d)(4)(A) trust.” A (d)(4)(A) trust is Medicaid-exempt, meaning that the person who created the trust can qualify immediately for Medicaid and/or SSI.
- If the person creating the trust himself or herself does not expect to need public benefits during his or her lifetime, or if the trust is funded through a will after the settlor’s death, then the trust will not require any reimbursement of the Medicaid program after the death of the beneficiary. Whatever remains can go to other family members, heirs or charities after the lifetime of the beneficiary.
Requirements for a (d)(4)(A) Trust
To qualify as a (d)(4)(A) Trust, an individual SNT must meet the following criteria:
- the beneficiary must be disabled;
- the trust must be for the “sole benefit” of the disabled beneficiary;
- only certain individuals—a parent, grandparent, guardians/conservator, court, or the individual himself or herself—can be the one who establishes the trust;
- the state Medicaid program must be the primary remainder beneficiary upon the death of the beneficiary, up to the amount that was paid by Medicaid for that persons benefit during lifetime.
If a (d)(4)(A) trust is created while the beneficiary is under age 65, it will remain exempt after the person reaches the age of 65. At that point, however, no new assets can be added by anyone who needs to be Medicaid-exempt.