Special Needs Trusts (SNTs): Preserving Benefits

A special needs trust allows a disabled individual to receive an inheritance, settlement, or other funds without losing eligibility for Medicaid and SSI benefits. The Bucks County Orphans' Court Manual provides detailed guidance on these trusts.

Third-Party Special Needs Trusts

Established by another person (parent, grandparent, etc.) using their own assets for the benefit of a disabled beneficiary. Authority: 42 U.S.C. § 1396p(d)(4)(A). Key advantage: no payback requirement. When the beneficiary dies, remaining trust assets pass to whoever the trust creator designated — not to the state.

This is the type of trust families should consider when doing estate planning for a loved one with disabilities. It allows you to leave an inheritance without disqualifying them from public benefits.

Self-Settled Special Needs Trusts (OBRA '93 Payback Trusts)

Established with the disabled individual's own assets (from an inheritance, lawsuit recovery, or their own savings). Authority: 42 U.S.C. § 1396p(d)(4)(C). Requirements:

• The beneficiary must be under 65 at the time the trust is funded
• The trust must be established by the individual, their legal guardian, or a court
• Must be approved by the Orphans' Court — a petition is filed seeking judicial approval
• A copy must be provided to DHS legal counsel for review
• The trustee cannot have discretion to make distributions directly to the beneficiary that would affect benefit eligibility
• Payback requirement: Upon the beneficiary's death, the state must be reimbursed for all Medicaid benefits paid during the beneficiary's lifetime before any remaining assets pass to other beneficiaries

Pooled Trusts

An alternative for smaller amounts or beneficiaries over 65. A pooled trust is managed by a nonprofit organization that pools funds from multiple beneficiaries for investment purposes while maintaining separate accounts. Upon the beneficiary's death, up to 50% of the remaining corpus is retained by the pooled trust administrator (62 P.S. § 1414(b)(3)(iii)).