DISABILITY ANNUITY SPECIAL NEEDS TRUST

by Thomas D. Begley, Jr., CELA

One of the trusts used in Medicaid Planning is a Disability Annuity Special Needs Trust (“DASNT”). A previous article discussed a Disability Annuity Trust (“DAT”). These trusts are designed so that an individual can establish a trust and transfer assets to the trust for the benefit of a disabled child of any age or a disabled individual under age 65 without incurring a Medicaid transfer of asset penalty. The problem with that trust is that the assets in the trust are considered available for public benefit purposes. Therefore, if a DAT were established for the benefit of an individual receiving Supplemental Security Income (“SSI”) and/or Medicaid, they would become ineligible for those public benefits because the assets in the trust would be countable. The solution would be to wrap a DAT inside a Special Needs Trust (“SNT”). In a Medicaid Planning context, the monies to be used to fund the trust would belong to the third party, usually a parent or a grandparent, so the SNT would be a Third-Party Special Needs Trust (“TPSNT”). In a typical situation, the parent would require long-term care and be applying for Medicaid. In order to become immediately eligible, from an asset standpoint, the parent would transfer the assets to a DASNT. The trust is exempt from the SSI and Medicaid transfer of asset penalties, and the assets in the trust would not be considered available because of the special needs provisions.

Generally, a family member, other than the trust beneficiary, would be the trustee of the DASNT, although a professional trustee could be utilized.