Special Needs Trust
By: Jamie Stephenson

Because of a DHHS hearing officer’s decision and pending appeal there is a possibility that distributions from a special needs trust may be counted as income to the beneficiary. The federal law states that only distributions for basic needs like food and rent can be counted as income but some Medicaid workers are taking the position that a special needs trust can only make distributions for education, medical costs and trust administration. Any other use of the trust will be counted as income and may jeopardize the beneficiary’s eligibility for Medicaid services.

Individuals with Special Needs Trusts should consider the following options:

1.      Make distributions which may mean not receiving Medicaid for a period of time;

2.      Make no trust distributions until the Court appeal process has been completed;

3.      Consider making distributions only for the purposes of education, medical needs, and trust administration which some Medicaid workers are saying is fine;

4.      Consider acquiring assets in accordance with generally accepted federal law and also consider having the purchased assets continue to be owned by the trust so there is no distribution;

5.      Update your trust, or simply make no change while the Court appeal is going on because your trust should contain a provision allowing it to be updated in the future concerning changes in public benefits rules.