Special Needs Trusts & Government Benefits: Three Types of Trusts
by
Herbert D. Hinkle, Esq. and Valerie A. Powers Smith, Esq.
Hinkle & Fingles, Attorneys at Law
2651 Main Street
Lawrenceville, New Jersey 08648
(609) 896-4200 or (215) 860-2100
A person with a significant lifelong disability who receives or is
likely to receive assets either through personal injury litigation, or
from an inheritance will lose eligibility for programs and services
which employ an economic means test. Additionally, those assets will
be vulnerable to state claims for reimbursement for certain services
rendered. These problems can be overcome with one of three types of a
special needs trust (“SNT”):
SNT #1. This is a trust used to hold assets belonging to anyone
other than the person with a disability. Typically the parents will
create such a trust and fund it when they die, either through their
Wills, by making it the beneficiary of a life insurance policy or by
other similar means. This trust will specify that upon the death of
the person with a disability the remaining assets will go to other
family members, charities or anywhere that the parents might specify.
The person with a disability cannot put his/her assets into this
trust. As with the other two types of SNTs, the trust must specify
that the trust will not duplicate existing services and assets will be
spent in accordance with the eligibility rules of key programs.
SNT #2. (Sometimes called an OBRA Trust.) This trust is used to
hold assets that belong to a person with a disability, such as the
proceeds from personal injury litigation. Such trusts must be created
by a parent, grandparent, guardian or court1, must specify
that upon the beneficiary’s death, government will be repaid, at least
for the medical assistance (Medicaid) provided, and must be
irrevocable. 42 U.S.C.A. §1396p(d)(4)(A) and 42 U.S.C.A. §
1382b(e)(5). State regulations add the requirement of an annual report
and notice of an expenditure in excess of $5,000.
N.J.A.C. 10:71-4.11(g).
SNT #3. (Sometimes called a Miller Trust.) This trust is
available for use in a very limited number of cases involving people
who are on the Traumatic Brain Injury Medicaid Waiver Program (“TBI
Waiver”). The TBI Waiver does not allow a potential client to spend
down income in order to qualify. Thus, a person receiving, for
instance, $2,000 a month in Social Security and other disability
benefits would be ineligible even if his or her care exceeds $10,000 a
month. With a Miller Trust, income can be paid to the trust and
accumulated for the person’s benefit. Assets will go to reimburse the
government at the end of the person’s lifetime. The Miller Trust gets
its name from a court case - - Miller v. Ibarra.
Space does not permit a detailed explanation of why such trusts are
necessary. A larger version of this Article is available on BIANJ’S
and the authors’ website.
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1In many cases because the beneficiary is not competent
either as a result of age or disability, judicial approval will be
necessary to deposit assets into the trust, or in some cases, to
create it.
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Herbert D.
Hinkle, his partner, Ira M. Fingles, and their colleagues, S. Paul
Prior and Valerie A. Powers Smith, maintain a statewide
law practice with offices in Lawrenceville, Marlton, and Florham Park,
New Jersey, and Yardley, Pennsylvania. They lecture and write frequently
on topics of law, aging, disability and estate planning and are available
to speak to groups in New Jersey and Pennsylvania
at no charge.
Comments and suggestions
for future articles should be mailed to: Hinkle & Fingles, 2651 Main Street, Suite A, Lawrenceville, New Jersey 08648-1012.
Copyright 2005
Herbert D. Hinkle. All rights reserved.
