Special Needs

Medicaid Payback Trusts or Special Needs Trusts

Typically, Medicaid Payback Trusts (also called "Special Needs Trusts") are funded by assets received by the person with a disability through a personal injury settlement, jury award, or an inheritance.  The beneficiary of a Medicaid Payback Trust must be under 65 when the trust is established, the individual must meet the definition of disability under the Social Security Act Title II, and the trust must include a Medicaid reimbursement provision.  Some SNTs are established and overseen by a Probate Court.  Others require no court supervision.

Pooled Trusts

A pooled trust is a Medicaid Payback Trust which may be advisable when a smaller amount of assets is involved and when it is in the best interests of the individual for a professional to make decisions about investments and distributions (payments out of the trust).  Pooled trusts are available in Ohio through the Community Fund Management Foundation in Cleveland and The Disability Foundation in Dayton.  The pooled trust involves relatively low management fees, but it is also less flexible in terms of the process of making distributions from the trust account.

Supplemental Services Trust

Unlike a pooled trust, which is created with the beneficiary's personal assets, the Supplemental Services Trust must be created with the assets of another. For instance, this trust allows a parent to transfer assets for the benefit of their disabled child either during the parent's lifetime or after the parent's death.  The trust must be for an individual who meets the eligibility requirements for services from the state department or county board of Mental Retardation and Developmental Disabilities ("MR/DD"), or from the state department or county board of alcohol, drug addiction, and mental health.

Third-Party Discretionary Trust

A discretionary trust must also be funded with the resources of another individual, either during his or her lifetime, or through the provisions of his or her will at death.  Such an arrangement is appropriate when an individual establishing the trust wants it to be available for the benefit of a group or class of beneficiaries which includes the recipient or prospective recipient of means-tested government benefits. The terms of the trust do not mandate that any beneficiary receive any particular amount of the trust funds, nor can any one beneficiary demand that trust funds be distributed for his or her benefit.  Therefore, the trust funds are not considered to be assets of any one beneficiary, the funds are not available for food and shelter, and no Medicaid payback provision is required.  A discretionary trust can also be established for a single disabled beneficiary, but it may be subject to more scrutiny as an available resource for benefit eligibility purposes.

For more information regarding estate planning for individuals with disabilities, please contact:

• Janet L. Lowder
• Sandra J. Buzney
• Amanda M. Buzo

Frequently Asked Questions about Special Needs Planning

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