In general, for purposes of determin- ing an individual’s eligibility for means-tested programs, a properly drafted Special Needs Trust should not be con- sidered a resource of the beneficiary if it: 1. Is irrevocable. 2. Contains assets of a disabled individual under age 65.


3. Is established for the benefit of the dis- abled individual by a parent, grandparent, legal guardian, or a court.


4. Provides that the State will receive all amounts remaining in the trust upon the death of the disabled individual up to an amount equal to the total Medi- cal Assistance lien paid on behalf of the individual under a State plan.


5. Meets all applicable State law require- ments.2


As indicated above, the corpus of a


Special Needs Trust cannot be added to after the client reaches age 65. A Special Needs Trust can still be established if there are structured settlement payments which continue after age 65; however, these pay- ments may impact the client’s eligibility to continue to receive government means- tested benefits.3


Specialized professional


consultation regarding methods of man- aging funds received by a disabled client after age 65 is highly recommended. Other considerations which, if not


addressed by the disabled client’s attor- ney, could result in adverse consequences which include, but are not limited to, the following: • If after the client’s death, a purchased annuity plan continues to make peri- odic payments, the annuity must provide that such payments must be paid to the State until the Medical Assistance lien is satisfied. 4


• Neither the disabled client nor the client’s guardian should receive funds prior to funding the Special Needs Trust. If the disabled client receives any funds, the client could lose eligi- bility for government means-tested programs.


• The Settlement Agreement and Re- lease should state that the client and the client’s guardian have not received any funds from the settlement and that any annuity payments will be funding a Special Needs Trust pursuant to the Act. This will avoid any appearance of “constructive receipt” by the disabled client.


2 3


4 42 U.S.C. 1396 p(d)(4)(A) (1994).


See MICPEL, Trusts for Persons with Disabili- ties, D-05 (Jan. 1999).


See 42 U.S.C. 1396 p(d)(4)(A)(1994) and COMAR 10.09.24.08-2.


Winter 2000 5 6


See 42 U.S.C. 1396 p(d)(4)(A)(1994) and COMAR 10.09.24.08-2.


See 42 U.S.C. 1396 p(d)(4)(A)(1994) and COMAR 10.09.24.08-2.


Trial Reporter


Dealing With Client Expectations: The headaches and pitfalls associated with the expectations of the client and the client’s family or guardian following a monetary recovery can be avoided by dis- cussing realistic expectations with the client early in the litigation process. Many clients and their families have inflated and unrealistic expectations of what will hap- pen financially if and when there is a monetary recovery. Some clients’ fami- lies believe that they will be able to use the money to buy a large, expensive home, to take trips to Disney World, and to re- ceive income for services family members provide to the disabled client. However, this is not the case and at the outset, the client’s attorney or a more qualified pro- fessional should address these issues and others. For instance, according to the Office


of the Attorney General for the State of Maryland, to be consistent with “Medicaid principles”, family members (as defined under COMAR 10.09.20.01B(8)) are prohibited from receiving compensation for providing care to a beneficiary and for being compen- sated as trustees or as members of a Trust Advisory Committee. Clients must be made to understand that even though they receive a large monetary recovery, to pre- serve those assets and remain eligible for Medical Assistance, a Special Needs Trust, or other approved method, must be used to manage the funds. If such an approved method is not used, the disabled plaintiff may lose Medical Assistance and be forced


• The trust cannot directly benefit any- one else, including the beneficiary’s guardian.5


• The trust must state that it will not be used to provide food, clothing and shelter for the beneficiary that are oth- erwise provided by government benefits.6


The above is a non-inclusive list of the requirements for a properly drafted Spe- cial Needs Trust. This list is included to illustrate the myriad of requirements that must be met to preserve a disabled client’s eligibility for state, local and federal means-tested benefits programs. For that reason, consultation with a professional specializing in Special Needs Trusts is highly recommended.


to pay out-of-pocket for expensive treat- ment and supplies. Specialized professional consultation regarding the communication of realistic expectations to the client and the client’s family or guardian is highly recommended.


Why Protecting A Disabled Client’s Eligibility For Medical Assistance Is Important:


Eligibility for monthly income streams


provided under Medical Assistance is only one important reason for preserving a dis- abled client’s eligibility. Allocations from the federal Medicaid budget go to each state to provide ongoing community and long-term residential care for a great num- ber of persons with a wide variety of disabilities. The federal Medicaid pro- gram often includes such non-traditional medical services as therapies, long-term care and rehabilitation, group home or other living arrangements, sheltered work- shops or work activity rehabilitation, and other direct client-centered needs. Main- taining the client’s eligibility for such Medical Assistance opens up an entire system of state services for social pro- grams, residential alternatives, rehabilitation, and case management. The preservation of potential future means-tested benefits is critical unless a disabled client’s settlement or judgment fully and completely compensates the cli- ent with no risk that the client’s future medical and ongoing living needs will exceed the available settlement or judg- ment. Many states do not allow an individual to privately purchase into the same Medical Assistance program that could have been obtained free but for the settlement or judgment being included as a client resource. States appear to do this to maintain control over the possible placements in facilities and programs such as group homes, workshops, and rehabili- tation services by restricting who can be placed into these programs. State agen- cies want to ensure that their clients have priority for services. To accomplish this, they often include provisions in State con- tracts with these facilities and programs that can penalize the service provider in the event they accept private paying cli- ents.


The disabled client receiving a settlement or judgment could be in the position of being unable to use the assets to obtain the services needed to develop remaining capabilities and to benefit from the most highly skilled public service ben- efits available.


(Continued on page 18) 17


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