I’m receiving a personal injury settlement,
but need Medicaid.
Can a Special Needs Trust help?
There are two common situations in which the use of a Nevada self-settled special needs trust may be beneficial. One is when you’ve been in an accident and there is a personal injury settlement waiting to be paid. But because of the nature of the injury you are now in need of government benefits, such as Medicaid. If you receive the settlement proceeds, the government benefits may be lost. What can you do?
The other common situation is one in which a disabled individual is already receiving government benefits such as Medicaid. Then the parent dies leaving an inheritance to the disabled child without having set up the proper Third-Party Special Needs Trust. What can be done to prevent the child from losing the government assistance?
This is where a Special Needs Trust (“SNT”) that is self-settled can come into play. This is also referred to as a First-Party SNT. An SNT is used to allow the beneficiary to qualify for certain means-tested government benefits like Medicaid or Supplemental Security Income (“SSI”).
For a First-Party SNT to work, there are very strict requirements that must be met. If you meet the requirements, Nevada will not look at the trust assets when considering whether the applicant qualifies for Medicaid.
So what are some the requirements? The SNT must be set up during life and be irrevocable. Even though the SNT is self-settled, it is actually established by the applicant’s parent, grandparent, legal guardian, or a court. The applicant, the applicant’s spouse, and the applicant’s child cannot set up the special needs trust. Once set up, the applicant’s assets go into the trust.
Also, only the applicant can be the primary beneficiary of the SNT. The trust can name a remainder beneficiary to receive the assets upon the applicant’s death and after the state has been reimbursed.
In making distributions, even though the Trustee has discretion over the use of trust principal and income, there are specific restrictions that allow the Trustee to only use trust assets for the beneficiary in such a way as to not disqualify the beneficiary from government benefits.
In order to properly establish a First-Party Special Needs Trust in Nevada, contact our office for a free consultation.