Special Needs Trusts

How will a personal injury settlement effect eligibility for public benefits? (i.e. Medicaid, SSI, etc.) Setting up a Special Needs Trust is widely considered the best way to preserve eligibility and maximize settlement recovery "efficiency".  By establishing the trust, you effectively retain the availability of of both public (Medicaid) and private resources (the settlement proceeds).

According to the Omnibus Reconciliation Act of 1993 [revised 42 U.S.C. 1396 p(d)(4)] assets held in a "special/supplemental needs" trust are not considered assets of the individual.  The statute defines a Special Needs Trust in part the following way:

"A trust containing assets of an individual under Age 65 who is disabled (as defined in this Title) and which is established for the benefit of such individual by a parent, grandparent, legal guardian of the individual or a Court if the State will receive all amounts remaining in the trust upon the death of such individual up to an amount equal to the total medical assistance paid on behalf of the individual under a State plan under this subchapter.

It is important that the Special Needs Trust be drafted by legal counsel to comply with the Omnibus Reconciliation Act of 1993 [revised 42 U.S.C. 1396 p(d)(4)] and approved by the court as a component of the settlement agreement or release. These trust funds are restrictive (and irrevocable) and may be used to provide for certain expenses not covered by public benefits.