Is it true when a special needs trust is created, a person is not permitted to apply for benefits programs?
No, however, each public benefits program has restrictions that the supplemental needs trust must comply with in order not to jeopardize the beneficiary’s continued eligibility for public benefits. Medicaid and SSI are quite restrictive, making it difficult to create a trust and still retain eligibility for Medicaid benefits. But both programs allow two “safe harbors” permitting the creation of supplemental needs trusts with a beneficiary’s own money if the trust meets certain requirements. The first of these is called a “payback” or “(d)(4)(A)” trust, referring to the authorizing statute. Payback trusts are created with the assets of a disabled individual under age 65 and are established by his or her parent, grandparent or legal guardian or by a court. They also must provide that at the beneficiary’s death any remaining trust funds will first be used to reimburse the state for Medicaid paid on the beneficiary’s behalf. Medicaid and SSI law also permits “(d)(4)(C)” or “pooled trusts.”
