Use of Trusts in Elder Law and Disability Planning

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Chayet & Danzo, LLC

Posted on

Jun 03, 2010

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Colorado - Denver Metro

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Several different types of trusts can be used to enhance the quality of life for an individual with special needs who receives public assistance, such as Supplemental Security Income (SSI) and Medicaid. Some examples of how funds in a properly created special needs trusts can be used are for education expenses, travel, and entertainment.

A disability trust is created for a trust beneficiary under the age of 65 who is disabled under Social Security's criteria and is funded with the beneficiary's own assets. The disability trust is established by the beneficiary's parent, grandparent, or legal guardian, or by a court and must contain a provision to reimburse the state medical assistance program for benefits paid during the beneficiary's lifetime.

A pooled trust is available to Medicaid recipients who are over or under the age of 65 and are disabled. It is funded with the beneficiary's own assets. The trust is established by the individual, a parent, grandparent, or legal guardian, or by the court.
The pooled trust is comprised of separate accounts for many disabled individuals, which are pooled for investment and management purposes. The trustee of a pooled trust must be a non-profit organization.

Funds remaining in the individual's account at his death must be used to reimburse the state Medicaid agency up to the amount of medical assistance provided on the individual's behalf, to the extent that those funds are not retained by the pooled trust.
A third-party discretionary trust (TPDT) is commonly established by a relative, such as a parent or grandparent. A TPDT does not contain a payback provision to reimburse the state Medicaid agency. There are no restrictions on the beneficiary's age.
A testamentary special needs trust (TSNT) can be created by anyone under their will. This trust is generally used by parents of a special needs child. A TSNT can also be used by the spouse of a disabled person who receives certain types of Medicaid benefits. However, there are limitations on the amount of the spouses' assets that can be used to fund the trust.

An income trust is necessary for an individual who requires long-term care and whose income exceeds 300% of the SSI limit. For 2010, the 300% limit is $2,022. If the individual resides in a long-term care facility, most of his income, minus a small personal needs allowance, will be paid to the facility each month as his patient payment.
There a several different ways of creating a special needs trust to enhance the quality of life for the trust beneficiary. You should work closely with an elder law attorney who is experienced with these types of trusts as well as the different public benefits programs to decide which trust works best for your situation.

Marco Chayet is a partner, and Dawn Hewitt is an associate, in the law firm Chayet & Danzo, LLC, (303) 355-8500. Their practice emphasizes elder law, guardianships, conservatorships, public benefits, probate, estate planning, and long-term care planning. They can be reached online at www.ColoradoElderLaw.com or by e-mail at Marco@ColoradoElderLaw.com or Dawn@ColoradoElderLaw.com.

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Local Services By This Author

Chayet & Danzo, LLC

Fiduciary Services 650 South Cherry Street, Denver, Colorado, 80220

We are a client-focused elder law and estate planning firm serving all of Colorado. Our attorneys provide the highest quality legal services and professionalism, while representing our clients in a cost-effective manner. Meeting the needs of our elder law clients depends on moving beyond conventional legal work to offering practical assistance in planning, counseling, educating, and advocating for the senior or disabled client and their families. Call Toll Free 1-866-873-6596.

Chayet & Danzo, LLC

Guardianship/Conservatorship 650 South Cherry Street, Denver, Colorado, 80246

We are a client-focused elder law and estate planning firm serving all of Colorado. Our attorneys provide the highest quality legal services and professionalism, while representing our clients in a cost-effective manner. Meeting the needs of our elder law clients depends on moving beyond conventional legal work to offering practical assistance in planning, counseling, educating, and advocating for the senior or disabled client and their families. Call Toll Free 1-866-873-6596.

Chayet & Danzo, LLC

Elder Law 650 South Cherry Street, Denver, Colorado, 80246

We are a client-focused elder law and estate planning firm serving all of Colorado. Our attorneys provide the highest quality legal services and professionalism, while representing our clients in a cost-effective manner. Meeting the needs of our elder law clients depends on moving beyond conventional legal work to offering practical assistance in planning, counseling, educating, and advocating for the senior or disabled client and their families. Call Toll Free 1-866-873-6596.