2. Providing for Persons with Disabilities
Special Needs Trust Basics 2

3. Setting Objectives
Proper planning will focus on achieving as much independence as possible for the disabled beneficiary
Benefits alone should not be the sole planning objective. 3

4. Elements of a Special Needs Trust
A Trust is a contract to control property for the benefit of a beneficiary to meet some objective
A special needs trust is drafted specifically so trust assets are considered not to be "available resources" in calculating the disabled person's eligibility for needs based benefits. 4

5. Elements of a Special Needs Trust
The Social Security Administration describes a discretionary trust as “a trust in which the trustee has full discretion as to the time, purpose and amount of all distributions.”
If the beneficiary has no discretion over the distributions, the trust is not counted for SSI eligibility. 5

6. Elements of a Special Needs Trust
The funds in the trust may then be used to supplement the beneficiary’s needs not covered by public benefits without a reduction or elimination of SSI, MediCal or IHSS. 6

7. Examples -Supplemental Trusts
No part of the assets of this trust shall be used to supplant or replace public assistance benefits of any county, state, federal, or other governmental agency which has a legal responsibility to serve persons with disabilities which are the same as or similar to Matthew's.

8. Examples - Discretionary Trusts
In making any distribution, the Trustee:
Shall consider any other known income or resources of the beneficiary and reasonably available;
Shall take into consideration all benefits available from any government agency, such as Social Security disability payments, Medicare, Medicaid (Medi-Cal), Supplemental Security Income (SSI), In-Home Support Service (IHSS) and any other special purpose benefits for which the beneficiary is eligible;
Shall consider resource and income limitations of any
such assistance program;
Shall make expenditures so that the beneficiary's standard of living will be comfortable and enjoyable;
Shall not be obligated to or compelled to make specific payments;
Shall not pay or reimburse any amounts to any government agency or department, unless proper demand is made by such government agency and reimbursement is required by the State;
Shall not be liable for any loss of benefits.

9. Supplemental and Discretionary Special Needs Trusts
A Supplemental Special Needs Trust only allows distributions that do not in any way reduce needs based benefits
A Discretionary Special Needs Trust allows greater flexibility but requires greater skill in administration. 9

10. SPECIAL NEEDS TRUSTS
Can be a testamentary trust as part of the parent's living trust or will
Stand alone Special Needs Trust with a pour-over provision in the parent’s living trust
Allows other family members or loved ones to contribute to the trust
The management issues in a Special Needs Trust are different than most Living Trusts
Allows greater privacy 10

11. Special Needs Trusts Can Be Divided Into Two Categories
3rd party
No recovery upon death of beneficiary
If the source of the fund are from someone other than the benefits recipient, the trust is categorized as a Third Party Special Needs Trust
If the source of the funds of the Special Needs Trust are from the benefit’s recipient, then the trust is categorized as a self settled or MediCal Payback Trust
Special Needs Trust
Self Settled MediCal Payback
Medi-Cal Recovery upon Death of Beneficiary

12. The Third party or Estate Planning Special Needs Trust

13. Third-Party Trust Social Security says SI 01120.200 A 17
A third-party trust is a trust established by someone other than the beneficiary as grantor. For example, a third-party trust may be established by a grandparent for a grandchild.
Be alert for situations where a trust is allegedly established by a third party, but in reality is created with the beneficiary's property.
Special Needs Trust

14. Third-Party Trust SI A 17
A third-party trust can have great latitude, and upon the death of the beneficiary can be left to anyone you wish except:
You cannot leave it to the
Dale Law Firm, PC
Special Needs Trust

15. The Individual Self Settled MediCal Payback Trust

16. Self Settled Special Needs Trusts or MediCal Payback Trusts SI 01120
Self Settled Special Needs Trusts or MediCal Payback Trusts SI B1.
Federal Law Allows A Disabled Individual to Protect Their Own Assets And Maintain Their SSI AND Medi-Cal If The Special Needs Trust
Which contains the assets of an individual under age 65 and who is disabled ; and
Special Needs Trust

17. Self Settled Special Needs Trusts or MediCal Payback Trusts SI 01120
Self Settled Special Needs Trusts or MediCal Payback Trusts SI B1.
Federal Law Allows A Disabled Individual to Protect Their Own Assets And Maintain Their SSI AND Medi-Cal If The Special Needs Trust
Which is established for the benefit of such individual by a parent, grandparent, legal guardian or a court; and
Special Needs Trust

18. Self Settled Special Needs Trusts or MediCal Payback Trusts SI 01120
Self Settled Special Needs Trusts or MediCal Payback Trusts SI B1.
Federal Law Allows A Disabled Individual to Protect Their Own Assets And Maintain Their SSI AND Medi-Cal If The Special Needs Trust
Which provides that the State will receive all amounts remaining in the trust upon the death of the individual up to an amount equal to the total medical assistance paid on behalf of the individual under a State Medicaid plan.
Special Needs Trust

19. Pooled Special Needs Trusts MediCal Payback Required

20. A pooled trust is a trust SI 01120.203 B2a
It is sometimes called a “master trust” because it contains the assets of many different individuals, each in separate accounts established by individuals, and each with a beneficiary.
By analogy, the pooled trust is like a bank that holds the assets of individual accountholders.

21. The provisions of the SSI trust statute do not apply to a trust containing the assets of a disabled individual which meets the following conditions:
The pooled trust is established and maintained by a nonprofit association;

22. The provisions of the SSI trust statute do not apply to a trust containing the assets of a disabled individual which meets the following conditions:
Separate accounts are maintained for each beneficiary, but assets are pooled for investing and management purposes;

23. The provisions of the SSI trust statute do not apply to a trust containing the assets of a disabled individual which meets the following conditions:
NOTE: There is no age restriction under this exception.
ALERT – THERE MAY BE A TRANSFER PENALTY IF THE DISABLED INDIVIDUAL GOES TO A NURSING HOME.

24. Who Established the Trust Account
In order to qualify for the pooled trust exception, the trust account must have been established by the disabled individual himself/herself or by the disabled individual's:
parent(s);
grandparent(s);
legal guardian(s); or
a court.

25. State Medicaid Reimbursement Provision
To qualify for the pooled trust exception, the trust must contain specific language that provides that,
to the extent that amounts remaining in the individual's account upon the death of the individual are not retained by the trust, the trust pays to the State from such remaining amounts in the account an amount equal to the total amount of medical assistance paid on behalf of the individual under the State Medicaid plan.

26. State Medicaid Reimbursement Provision
To the extent that the trust does not retain the funds in the account, the State must be listed as the first payee and have priority over payment of other debts and administrative expenses except as listed in SI B.3.a.