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Special needs trust versus supplemental needs trust

On Behalf of | Feb 21, 2022 | Special Needs, Trusts | 0 comments

People in Pennsylvania who have disabilities may qualify for Medical Assistance, known as Medicaid in the rest of the country. Eligibility for MA depends on financial resources.

Special needs trusts and supplemental needs trusts both set aside money on behalf of a disabled person for the purposes of preserving his or her MA eligibility. However, they are not the same, and understanding the difference is crucially important for the one planning on the beneficiary’s behalf.

Special needs trusts

According to the Pennsylvania Department of Human Services, a special needs trust is for assets already belonging to the beneficiary. A personal injury settlement is one example of such funds. A special needs trust preserves the beneficiary’s eligibility for MA but must include a provision to pay back any MA expenses the beneficiary incurs. It is subject to approval by the Office of General Counsel. If there are disbursements made from the trust, they must be for the beneficiary’s sole benefit. The beneficiary must be under the age of 65 at the time of the establishment of the trust.

Supplemental needs trusts

A supplemental needs trust is for resources that are for the beneficiary but not already belonging to him or her. The trust is the creation of a friend, relative or other third party created with his or her own funds. Unlike a special needs trust, there is not a requirement to include an MA payback provision in a supplemental needs trust. However, if it does include such a provision, it is necessary to file it with the SNT Depository.

If the beneficiary is an MA recipient or applies for MA at some point, the trustee has to report the trust to the County Assistance Office, which makes the determination whether it should count as a resource to affect the beneficiary’s MA eligibility.

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