FINANCIAL PLANNING
Finding the Special Needs Trust
That’s Right for Your Family
By Ryan F. PLATT, MBA, ChFC, ChSNC
Question: “My husband and I have been researching Special Needs Trusts, and we
have realized there are multiple types. Would you mind describing the types of Special
Needs Trusts that exist and the reasons for each?”
Answer: You are correct. Special Needs Trust is a
broad term that can comprise various types of trusts.
We will briefly explain the three main types:
1.
D(4)a or Self-Settled Special Needs
Trusts
This type of trust is used in situations when
the individual with special needs receives
money in his/her name, and that money must
be removed from the estate (not owned by
him/her), so he/she can continue to qualify for
government benefit programs. This scenario
can occur:
Medicaid Spend down, the individual
could use one of these types of Special
Needs Trusts.
By utilizing this type of Special Needs Trust, the
individual can continue to benefit from this
money, while still qualifying for government
benefits. The drawback to this type of trust
is at the end of the individual’s life, any mon-
ey remaining in the D(4)a trust is subject to a
Medicaid payback, which could result in all the
money in the trust being seized by Medicaid.
However, if your child receives a large sum of
money, this is many times the only option.
a. Due to an incorrectly designed will or
beneficiary designation that lists the in-
dividual with special needs directly by
name, which means he/she received a
lump sum amount of money.
b. Due to a settlement from a lawsuit
where the individual was provided a fi-
nancial lump sum usually based upon
some form of negligence that caused an
injury to the individual.
c. If the individual with a disability was
saving money and his/her savings ex-
ceeded the Medicaid Limit. To avoid a
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2.
D(4)c or Pooled Special Needs Trust
A Pooled Special Needs Trust is typically run by
a nonprofit organization that will manage the
trust and be the trustee. “Pooled” means that