Self Settled Special Needs Trusts

Normally, in order for a person to qualify for Medicaid or Supplemental Security Income (SSI), the person must have very few assets. If the person has assets over the qualification threshold, typically the person must spend down their assets first. One way to avoid having to spend all of your assets and still qualify for Medicaid, SSI and other government benefits is to create a Self-Settled Special Needs Trust.

A Self-Settled Special Needs Trust is a trust established using the funds of the special needs person for the benefit of the special needs person. A Self-Settled Special Needs Trust is also frequently called a First Party Special Needs Trust, a Supplemental Benefits Trust or a (d)(4)(A) Trust because the Social Security Act, Section 1396p(d)(4)(A) specifically allows for these trusts to be considered an exempt asset for purposes of qualifying for Medicaid and SSI.

The prime reason why the government allows Self-Settled Special Needs Trusts is because when the special needs person dies, whatever is remaining in the trust must be used to pay back any Medicaid expenditures that have been made over the lifetime of the person. This pay back provision is the biggest difference between First Party Special Needs Trusts and Third Party Special Needs Trusts.

Special Needs Trust Administration of all Special Needs Trusts can be very complex because those trusts are limited in what they can pay for by statute. Special Needs Trusts can generally not pay for food, shelter, electricity, gas or water and it may not pay for anything that can be converted into food, shelter, electricity, gas or water. Additionally, cash should almost never be distributed to a beneficiary from the trust and there are special rules about a trust owning a home.

Who can create a self settled special needs trust varies slightly based upon where you live and your particular situation, but usually it can be established by a judge, a court-appointed guardian for the special needs person, the parent of a special needs person or the grandparent of a special needs person.

Kevin Pollock is the elder law attorney in charge of the firm's Special Needs Planning Department. Attorney Kevin Pollock has focused on Wills, Trusts & Estates since 2000 when he received his master's degree in taxation.

For more information on Special Needs Planning, please visit my blog: Kevin A. Pollock BLAWG

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