Planning for Life

"Special" or "Supplemental" Needs Trusts? - Massachusetts

Posted by Harry S. Margolis on September 10, 2013

Find me on:

By Harry S. Margolis

When the field of special needs planning began some two decades ago, we generally called the trusts we created for people with disabilities “supplemental” needs trusts.  Our thinking was that the purpose of the trusts was to supplement the assistance provided by Medicaid (MassHealth in Massachusetts), Medicare, Social Security, Supplemental Security Income and other public benefits programs whose level of support is meager at best.

With passage of the OBRA legislation in 1993 authorizing the creation of self-settled trusts under 42 USC §1396p(d)(4)(A), some practitioners called for distinguishing between these new trusts and third-party trusts often created by a parent, by calling the new trusts “special” needs trusts and continuing to call the older trusts “supplemental” needs trusts.  But this approach never really caught on.

Instead, over time both types of trusts have come under the rubric of “special” needs trusts and the term “supplemental” needs trust has fallen away.  The term, “special” needs trust refers both to the purpose of the trust to pay for the beneficiaries', unique or special needs, and to their identity as people with special needs (a term many people prefer to people with disabilities or disabled people).  In short, the titled is focused more on the beneficiary while the name “supplemental” needs trust addresses the shortfalls of our public benefits programs.

Special needs trusts now encompass both traditional “third-party” trusts and those under OBRA, which are often referred to as “(d)(4)(A)” trusts referring to the statute, as “pay-back” trust referring to the feature that any funds remaining in the trust at the beneficiary’s death must be used to reimburse the state Medicaid agency, or “self-settled” trusts referring to the fact that these trusts are created with the Medicaid beneficiary’s own funds.

Special needs trusts created with someone else’s funds, whether a parent, grandparent, or someone else, are often referred to as “third-party” special needs trusts.

Whether “supplemental” or “special” the trusts serve the same purpose of helping meet the needs of individuals with disabilities while still permitting them to qualify for vital public benefits programs. The more important distinction is whether the money and property funding the trust belongs to the beneficiary seeking benefits or comes from someone else, such as a parent or grandparent. If the funds belong to the beneficiary,she must use a trust that provides for paying back the state for Medicaid (MassHealth) benefits at her death. If the funds come from someone else, there's no need for such a payback provision.

Learn more about Special Needs Trusts & Planning »

Topics: Retirement Planning, special needs planning

Subscribe to New Blog Posts

Recent Posts

Most Popular Posts

Posts by Topic

see all