Summary of general requirements of a Special Needs Trust
An appropriate Special Needs Trust (Supplemental Needs Trust in New York) must be drafted by legal counsel to comply with the Omnibus Reconciliation Act of 1993 [revised 42 U.S.C. 1396 p(d)(4)] and approved by the court as part of the settlement agreement or release. As part of the trust agreement, the injured party must meet the definition of disability under Social Security and,
1. may not own or have direct access to the trust fund, and the trust must be irrevocable.
2. Individual must be under age 65
3. Trust must be irrevocable
4. The injured party cannot be the grantor or settlor of the trust; trustee and successor trustees must be other than the injured party; and trustees have absolute discretion regarding the disbursement of funds for supplementary needs
5. Must comply with Medicaid lien provision. Pursuant to Omnibus Reconciliation Act of 1993 [revised 42 U.S.C. 1396 p(d)(4)] assets held in a trust are not considered assets of the individual. Beneficiaries of trusts that comply with the Act's provisions need not exhaust trust assets to qualify for Medicaid or certain other government assistance, since the assets of this kind of trust don't count in determining eligibility for Medicaid. When the beneficiary dies, however, the State gets back from the trust whatever it paid for medical care on the trust beneficary's behalf. "A trust containing assets of an individual under Age 65 who is disabled….and which is established by a parent, grandparent, legal guardian of the individual or the Court, if the State will receive all amounts remaining in the trust upon the death of such individual up to an amount equal to the total medical assistance paid on behalf of the individual under a State Plan under this title" (the Medicaid Title)
Trust funds may not be used to provide for rent, clothing, or food, only for expenses not covered by entitlement benefits.
For more information about Settlement Trusts and the role of trustees please watch our introduction to settlement trusts on Talking Settlement
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Special Needs Links