When do I Need a Self-Settled Special Needs Trust?

Posted by: Thomas D. Begley, Jr.

In the settlement of litigation, the plaintiff is often receiving public benefits. The question then arises as to whether a special needs trust is required. There are certain types of public benefits that are means-tested. Others are not. Generally, means-tested public benefits require that the individual have assets of less than $2,000 and have certain limits on income. The following types of public benefits are means-tested and a special needs trust is generally required:

SSI
Medicaid
TBI – A Medicaid Waiver Program for persons suffering from traumatic brain injury
CRPD – A Medicaid Waiver Program providing home care
Section 8 Housing
Veterans Pension
Certain DDD Benefits
Psychiatric Institutionalization

Means-Tested Public Benefits

If the plaintiff is receiving any means-tested benefits or is likely to apply for them, then a self-settled special needs trust should be considered. Assets in the trust are not counted for public benefit eligibility purposes. Distributions from the trust can be made in such a way as not to count for income eligibility for public benefit purposes.

Age

To be eligible for a special needs trust, the plaintiff must be under age 65. If the plaintiff is over age 65, there are Medicaid planning strategies that can be employed, but a self-settled special needs trust will not be a viable option.

Disabled

To be eligible for a self-settled special needs trust, the person must be “disabled.” To be considered disabled, the person must generally have a disability determination by the Social Security Administration (SSA). It is possible, however, to receive a disability determination from a Medicaid physician. If a person has not yet received a disability determination from SSA, the trust can be established pending the disability determination. Good practice is to obtain an opinion letter from a law firm that specializes in Social Security Disability appeals.

Assets of Individual

No assets other than the assets of the disabled plaintiff may be placed in the trust.