Special Needs Trust Frequently Asked Questions
What is a Special Needs Trust?
How does the Corporation of Guardianship serve as trustee?
- Avoid any activity that conflicts with the purpose of the trust—which is to enhance the quality of life of the beneficiary.
- Spend money to enhance the beneficiary’s life, while making the trust funds last as long as possible.
- Respond to the beneficiary’s personal needs for goods and services that aren’t covered by SSI or Medicaid.
- Keep up with SSI and Medicaid income and resource rules so that the trustee’s spending doesn’t affect the beneficiary’s eligibility for SSI and Medicaid.
- Invest and manage trust property following the terms of the trust and state law in the beneficiary’s best interests.
- Keep the beneficiary and other interested persons up to date on trust activity.
- Work together with the beneficiary’s guardian or conservator if the court has appointed one.
- Keep accurate records, prepare reports that the SSI and Medicaid programs require, and file necessary federal and state tax returns.
- Go to court, if necessary and financially reasonable, to uphold the trust and require the SSI and Medicaid programs comply with applicable law.
- Terminate the trust if circumstances warrant doing so.
- Manage or distribute trust property after the beneficiary dies or the trust is terminated.
How can a Special Needs Trust be used?
When determining how the Special Needs Trust can be used, the Corporation of Guardianship staff consider the following questions:
- Is the expenditure permitted by the trust terms? Is it prohibited by Medicaid or Social Security regulations?
- Does the expenditure clearly benefit the trust’s beneficiary?
- Is there enough money in the trust to make the proposed payment without seriously affecting the ability to provide other benefits in coming years?
- Are there other sources of funds? If public benefits are available to provide the same items, the money ordinarily should not come from the trust.
What are the different types of Special Needs Trusts administered by the Corporation of Guardianship?
- Third Party Special Needs Trust – A trust established by a third party (usually a parent or relative) for the benefit of a loved one with a disability.
- First Party Special Needs Trust – A trust established with the beneficiary’s own funds – a personal injury settlement, inheritance, alimony, sale of property, or the beneficiary’s own savings. There are two types of First Party Special Needs Trusts:
- First Party (d)(4)(A) Special Needs Trust, and
- First Party (d)(4)(C) Pooled Special Needs Trusts
What is the difference between a First Party (d)(4)(A) Special Needs Trust and a First Party (d)(4)(C) Pooled Special Needs Trust?
- Who can serve as Trustee?
- A First Party (d)(4)(A) Special Needs Trust can be administered by a bank, a family member, or anyone the grantor chooses to serve as trustee.
- A First Party (d)(4)(C) Pooled Special Needs Trust must be administered by a non-profit organization.
- Who establishes the trust?
- A First Party (d)(4)(A) Special Needs Trust is established by a parent, grandparent, legal guardian, or the court – NOT the beneficiary him or herself.
- A First Party (d)(4)(C) Pooled Special Needs Trust is established by a parent, grandparent, legal guardian, the court – OR the beneficiary him or herself.
- If the beneficiary must establish his or her own trust, the only available choice is a Pooled Trust.
- How old is the beneficiary?
- A First Party (d)(4)(A) Special Needs Trust is funded before the beneficiary is 65 years old.
- A First Party (d)(4)(C) Pooled Special Needs Trust is funded before or after the beneficiary turns 65 years old (in some states, there may be a transfer penalty if established after the age of 65).
- If the beneficiary is 65 or older, the only available choice is a Pooled Trust.
- How are the remainder funds handled after the beneficiary dies?
- When the First Party (d)(4)(A) Special Needs Trust beneficiary dies, the remainder funds (if any) are paid back to Medicaid. If funds are left over after Medicaid payback, the remainder goes to the beneficiary’s heirs.
- When the First Party (d)(4)(C) Pooled Special Needs Trust beneficiary dies, a percentage of the remainder funds (if any) are paid back to Medicaid (in some states), and the remaining funds are retained by the non-profit trustee to be used for the benefit of other individuals with a disability.
I have a disabled family member. How can I set aside funds to care for him or her when I pass away?
I have a disabled family member who inherited a lump sum of money when a grandparent died. Can these funds be put into a trust?
How do I decide between a First Party (d)(4)(A) Special Needs Trust and a First Party (d)(4)(C) Pooled Special Needs Trust?
Do all Special Needs Trusts have the Medicaid payback provision?
Does the Corporation of Guardianship charge a fee to serve as trustee?
Yes, the Corporation of Guardianship is a fee-for-service nonprofit organization. By charging a fee for the services provided for those who are able to pay, CoG is able to serve more clients with limited resources. Our goal is to serve as many people as possible who are in need of our services, including those who are unable to pay a fee-for-service. To discuss your financial circumstances, please CONTACT US .