Special Needs Trusts

Special needs trusts are created for disabled individuals so that they can receive the maximum amount of government benefits and still have funds to provide for basic necessities and enjoyment.  There are a few different types of special needs trusts which are listed below.  The type of special needs trust that can be used depends on who funds the trust and the age of the disabled individual.

Supplemental Care Trusts

Supplemental Care Trusts are created for disabled individuals and are funded with the assets of another individual.  These types of trusts are usually used by parents, relatives or friends of a disabled beneficiary.  When the disabled beneficiary dies, the funds in this type of trust are not required to be paid to the government and/or to the institution trusted with the disabled individual’s care; the funds may go to any beneficiary designated by the individual who funds the trust.

OBRA (Omnibus Budget Reconciliation Act) ‘93 Disability Payback Trusts/Self Settled OBRA Trusts

An OBRA ’93 Payback Trust is a special needs trust that is created with the assets of a disabled beneficiary for the benefit of that individual.  These trusts are often funded with personal injury or workers compensation settlements that leave an individual disabled or when a disabled individual receives an outright inheritance.  The funds in this type of trust are used to supplement but not replace governmental benefits.

In order to be eligible for this type of trust, the beneficiary must be under the age of 65 and disabled.  Disability is determined under the Social Security Administration definition for the purposes of Supplemental Security Income and Medicaid qualifications.  OBRA 93’ Disability Payback Trusts must also be irrevocable and any liens from the Department of Human Services must be paid.  Because these types of trusts are funded with a beneficiary’s own money, the funds in the trust are payable to the government when the disabled individual dies.