“First Party” Special Needs and Pooled Interest Trusts
If you are the person in Scenario 2 from Part 1 of this series (the person
receiving governmental benefits) and you receive a substantial inheritance
outside of a properly drafted supplemental needs trust, or if you receive a settlement
from a lawsuit, you (or someone acting on your behalf) may wish to protect
the money or property from making you ineligible for certain governmental
benefits as well.
Two of the tools that we may be able to utilize under these circumstances
are First Party Special Needs [or (d)(4)(A)] Trusts, and Pooled Interest
[or (d)(4)(C)] Trusts. These trusts are often referred to as “self-funded” Trusts.
With the (d)(4)(A) Trust, the beneficiary must be under the age of 65 and
disabled according to SSI standards. The Trust must be self-funded, and
established by a parent, grandparent, conservator, guardian, or court
for the sole benefit of the beneficiary. This type of trust must include
provisions that permit the State to recover funds in order to pay back
the cost of Medicaid services provided during the beneficiary’s lifetime.
With the (d)(4)(C) Trust, the beneficiary must be disabled according to
SSI standards, and the trust will be maintained by a nonprofit association
that will “pool” separate trusts and administer them. A parent,
grandparent, conservator, guardian, court,
or the individual with the disability can establish the trust for the sole benefit of the beneficiary. These
types of trusts should ensure that “[t]o the extent that amounts
remaining in the beneficiary’s account upon the death of the beneficiary
are not retained by the trust, the trust pays to the State from such remaining
amounts in the account an amount equal to the total amount of medical
assistance paid on behalf of the beneficiary…” (See 42 U.S.C.
Additionally, the Center for Medicare and Medicaid Services (CMS) has indicated
that transfers to (d)(4)(C) Trusts by individuals who are 65+ may suffer
a penalty, and the State requires these individuals to prove that the
transfers shouldn’t incur a penalty. Specific requirements should
be discussed with the Special Needs Planning attorney.
If you have a child or grandchild with special needs, or you are currently
receiving needs-based benefits and have received a large sum of money,
please contact us to discuss how we may be of assistance. We can be reached
at (203) 651-5521.