Colleen:  Vincent, welcome back on your four part series on Trusts and Medicaid. Can you briefly sum up the first two parts?

Vincent: In the first two parts, we focused on how seniors can protect their assets and income by using certain types of trusts while accessing Medicaid long term care services.

The two trusts we focused in on were the Medicaid Asset Protection Trust for asset protection and the Pooled Income Trust for income protection.

Colleen: Now, today I understand that you are focusing on younger individuals who are disabled and need long term care?

Vincent: Yes, today I will be focusing in on people under age 65 who are disabled and need Medicaid long term care.

The First Party Special Needs Trust is a trust that can be funded with the assets of an individual under age 65 who is disabled.

The Trust funds can be used for the sole benefit of the individual while accessing Medicaid benefits for long term care services.

Let’s go over the requirements for a First Party Special Needs Trust.

Colleen: Can you give an example of who would benefit from this type of trust?

Vincent:  Sure, there are a number of situations when an individual can benefit from this type of trust.  For example:

1. A working individual who has assets and then become disabled from a car accident.
2. A young adult child who receives a medical malpractice settlement.
3. A developmentally disabled individual who inherits assets from a family member.

Those individuals will be rendered ineligible for Medicaid or lose their Medicaid because now they have assets in their name.

Colleen: How does the trust work? 

Vincent:  Let’s take a common situation: a Medical Malpractice settlement is to be paid to Johnny, a young adult.  When the settlement comes in, the funds can be transferred directly to the First Party Special Needs Trust under a court order.

The parents of the Johnny can be the ones setting up the trust.

The trust must be for the sole benefit of Johnny.

This means that the income and the assets of the trust can be used for the Johnny’s living expenses, supplement his medical care and give Johnny the highest quality of life.

Johnny’s medical and long term care can be covered by Medicaid.  In addition, he may be eligible for SSI – Supplemental Security Income. 

Colleen: What happens when the beneficiary passes away, who gets the assets remaining in the trust?

Vincent:  This is an important question to ask. When this law came into effect back in 1993, a trade-off was made for allowing individuals under age 65 and disabled to be immediately eligible for Medicaid by funding a First Party Special Needs Trust.

In order to qualify the Trust as exempt for Medicaid purpose, there must be a provision in the trust stating the Medicaid has a right to be paid for all services rendered to the beneficiary before anyone else inherits the trust assets.

In my opinion, this was a very good trade-off for allowing younger people who are disabled to maintain or qualify for Medicaid coverage of their long term care needs while allowing their assets to benefit them.

Colleen: Can you sum up the benefits of the First Party Special Needs Trust? 

Vincent:  The First Party Special Needs Trust can be a lifesaver for people under age 65, disabled and who have assets and who need necessary medical and long term care services covered under Medicaid.

Colleen:  Vincent, what comes next?  

Vincent: On Wednesday, March 30^th, we will discuss how parents can set up a Third Party Supplemental Needs Trust for a child with special needs.