Special Needs Trusts
A special needs trust, also referred to as a Medicaid trust or a special treatment trust, is designed to provide support and maintenance to someone on Medicaid without jeopardizing their government benefits. Medicaid eligibility currently requires that a single individual have no more than $2,000 in countable assets and not more than $2,163 of income per month; any assets or income over these amounts may cause the disabled individual to lose Medicaid benefits. The purpose of a special needs trust is to hold any additional funds over these limits in order to qualify an individual for Medicaid. Once established, the trust funds may then be used as needed by the disabled individual for anything not provided for by Medicaid, including transportation, insurance, education and extra medical care.
Trusts For A Disabled Individual Under 65
Just as the name indicates, this trust is designed to assist individuals whom are disabled and under age 65 at the time the trust is established. This type of special needs trust is funded with the assets of the disabled individual, either through lawsuit collection, inheritance or a direct gift. By placing these additional assets into a trust, the individual can maintain these assets without losing Medicaid benefits. The only drawback is, upon the death of the Medicaid recipient, the trust must repay the state for the cost of Medicaid services received by the beneficiary.
A Miller trust, sometimes known as a stream-of-income or an income cap trust, is designed to help an individual meet Medicaid’s income limit. A Miller trust allows the individual to funnel income into this trust that might push a Medicaid recipient over the limit, i.e., pension and Social Security. And once established, the income and interest earned by the trust can accumulate and are excluded as a resource for Medicaid planning. Nevertheless, upon the death of the Medicaid recipient, the trust must repay the state for the cost of Medicaid services received by the beneficiary.
Third-Party Special Needs Trust
Similar to the above stated trusts, a third-party special needs trust allows for assets to be held for the benefit of a disabled individual without affecting Medicaid eligibility. The primary difference is that someone other than the disabled individual, such as a parent, grandparent or sibling, provides the funding for the trust. Because these assets never belonged to the disabled individual in the first place, there is no requirement to repay Medicaid upon the death of the beneficiary. As a result, any remaining funds not used by the beneficiary may be returned to the family or passed on to the next of kin.
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