INDUSTRY INSIGHT
LONG-TERM CARE
SPONSORED CONTENT
PROTECTING ASSETS
WITH A SPECIAL
NEEDS TRUST
A
re you an individual with a disability or do you know a
family member or a loved one who is disabled? If so, it
is important for you to understand the role of a Special
Needs Trust (SNT) when planning for the care and support
of a disabled individual. An SNT is an essential legal tool that can be
utilized to protect assets in order to create or maintain eligibility for
the means-tested government benefits of a person with a disability.
In order to qualify for certain benefits, a person is defined as
“disabled” in accordance with the Social Security Administration (SSA)
guidelines if he/she has a “medically determinable physical or mental
impairment which results in the inability to do any substantial gainful
activity and can be expected to result in death or has lasted or can be
expected to last for a continuous period of not less than 12 months.”
Within an SNT, the person with a disability is known as the
beneficiary and is receiving the means-tested government benefits.
These benefits allow a person with a disability to pay for defined
expenditures that are critical to his/her well-being and quality of life.
Any assets transferred into an SNT for a disabled person’s benefit are
intended to supplement, not supplant, the person’s means-tested
government benefits. Means-tested government benefits include
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Medicaid, Waiver programs, Supplemental Security Income (SSI),
Social Security Disability Insurance (SSDI), and Medicare. Some
allowable expenditures from an SNT include medical care, clothing,
and transportation, while expenditures that are normally not allowed
include food and shelter.
There are also asset limits that are imposed in order to qualify for
or maintain specific means-tested government benefits. For people
receiving SSI, their income cannot exceed $2,000 in countable assets
if they’re single, or $3,000 if they’re married. If a person is receiving
Medicaid (Medical Assistance) for nursing home care or in-home care
through the PA Waiver program, he/she cannot exceed either $2,400
or $8,000 in countable assets, depending upon the individual’s gross
monthly income.
If a disabled person has countable assets in excess of the permitted
levels, he/she will be ineligible for the specific means-tested
government benefit. Two common scenarios where a person with a
disability may lose or become ineligible for benefits are (1) the person
receives an inheritance under a will or through intestate succession,
or (2) the person receives a financial settlement from a lawsuit. In
order to avoid any issues associated with these scenarios, a disabled
person, including his/her agent under a power of attorney or court-
appointed guardian, can transfer the proceeds from the inheritance
or financial settlement to a Special Needs Trust to be used solely
for the individual’s assistance and well-being without jeopardizing
critical government benefits.
When a disabled person transfers his/her own assets to an SNT,
including assets from an inheritance or financial settlement, that
person is creating a first-party (d)(4)(A) payback Special Needs
Trust or (d)(4)(C) pooled Special Needs Trust. Those with a disability
under 65 years of age, their parent, grandparent, legal guardian, or
the court can establish these types of trusts. In general, any assets
remaining in the payback Special Needs Trust after a person with
a disability passes away are subject to a “pay back” to the state up
to the amount that the state provided in Medical Assistance to the
person. However, if a Special Needs Trust is established with assets
from a family member or friend of a person with a disability, this type
of trust is known as a third-party trust and is not subject to a “pay
back” upon the passing of the beneficiary of the trust.
There are many opportunities to protect assets for a person with
a disability while also creating or maintaining eligibility for critical,
means-tested government benefits. However, this planning should
only be done with the professional guidance of an experienced elder
law attorney.
Ben Urso is an associate attorney with the elder law firm of
Zacharia Brown P.C.
Zacharia Brown assists individuals and their families with
Medicaid eligibility, Veterans Benefits planning, estate
administration, and estate planning including wills, powers
of attorney, living wills, and trusts. Pittsburgh - area office
locations include McMurray, McKeesport and Wexford.
Phone: 724.942.6200.
Website: www.pittsburghelderlaw.com.
E-mail: [email protected].
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