by Thomas D. Begley, Jr., CELA
Trusts for disabled individuals who have not reached age 65 and are funded with assets of the disabled person are authorized under OBRA-93.[1] The trust is for the benefit of disabled persons. The person must be under 65 at the inception of the trust. While the trust must be established and funded prior to the beneficiary attaining the age of 65, it may continue after 65. If the trust is funded with a structured settlement prior to the beneficiary attaining the age of 65, the trust remains viable even though payments from the annuity are received after age 65.
The trusts must be established by a parent, grandparent, legal guardian, or court.
Transfers to the trust are not subject to the transfer of assets rules. The trust should be drafted so that the resources are unavailable. This means that the trustee must have sole discretion with respect to distributions, and the beneficiary must not have any right to revoke the trust. The trust should be administered in such a way that the income is not counted as income to the beneficiary. Distributions can be made to third parties for the sole benefit of the beneficiary, or the beneficiary or a family member can obtain a credit card and send the bill to the trustee for payment so long as the charges on the credit card were for the sole benefit of the trust beneficiary.
The trust must provide that on death the funds remaining in the trust go first to reimburse Medicaid and then for the benefit of other beneficiaries.
[1] 42 U.S.C. § 1396p(d)(4)(A).
