317: 35-41.6(6)(A)

A Special Needs Trust (SNT) is a means by which money can be set aside for a person with special needs to improve that person’s quality of life. Assets put into a proper SNT are not considered towards eligibility for ABD-related benefits (short term and long term).

The ownership of assets places in an SNT is an important part of analyzing the SNT and what rules apply to it:
• If assets placed in trust came from (belonged to) the person with special needs, it is a “first party” SNT
• If assets placed in trust came from one or more third parties, it is a “third party” SNT

The naming of the trust, or calling it a “special needs” or “supplemental needs” trust does not determine whether it is a properly created SNT, or whether it is a first party or third party trust. If properly created, neither a first party SNT nor a third party SNT is considered a resource to the special needs trust beneficiary.

Criteria

The criteria for a first party SNT:

1. It must be created for the benefit of a particular person with special needs
2. That person must be under the age of 65
3. It must be established by the person with special needs, or that person’s parent, grandparent, or legal guardian or the courts
4. It must be funded only with the assets of the person with special needs
5. It must be irrevocable; it cannot be amended or dissolved without the permission of either DHS or OHCA (OK Health Care Authority)
6. When the SNT beneficiary dies, assets remaining in the trust must go to the state Medicaid agency to reimburse it for anything covered by the Medicaid agency

Exemption

1. Assets put into an SNT are exempt from being considered towards eligibility as a resource. Funding a first party SNT is not considered a transfer without commensurate return.
2. Money from the trust may be used to buy things for the person with special needs except for food or shelter (See “Limits to Exemption”). This can include vacation, TV, cell phone, modification to home to adapt the home to the person’s special needs, costs of a companion for the person with special needs on trips, etc.

Limits to Exemption

1. Any income received by the person with special needs is treated as income in the month of receipt regardless of whether it is subsequently deposited into the SNT.
2. Money distributed from the SNT directly to the person with special needs is counted as income for the month the money was transferred.
3. Money spent by the SNT for the beneficiary’s food or shelter (such as rent, mortgage, electric, water or gas utilities) is counted as income for the month of the transaction (See Countable In-Kind Income).
4. Assets transferred to the SNT after the person with special needs turns 65 are not exempt and must be treated as income or available resources, as applicable. The only exception is if a beneficiary had rights to annuity payments, support payments or Survivor Benefit Plan payments that the beneficiary irrevocably assigned to the SNT prior to age 65.

Worker’s Responsibilities

• Needs to get a complete copy of the document that creates the SNT and send it to Legal Services at Susan.Eads@okdhs.org, JoshuaJ.Holloway@okdhs.org, and Susan.Hohmann@okdhs.org
  • Legal Services needs to make sure the SNT meets all the required criteria from above, including that only the assets of the person with special needs went into the trust.
  • Send a copy of the SNT so they can forward a copy to OHCA.
• In the course of reviewing the benefit application, be on the lookout for evidence the SNT made distributions directly to the person with special needs or directly or indirectly paid for food or shelter. It is not necessary to review separate trust records (such as bank statements) unless other evidence, such as the client’s own bank statements or housing situation, raises the likelihood of improper distributions from the SNT.

Criteria

The criteria for a Third Party SNT:

1. It must be funded with the assets of someone other than the person with special needs, and names one or more beneficiaries.
   • Can include SNT provisions in the parent’s or family trust that leaves an inheritance to the client, or the creation of a new trust for this purpose.
2. Appoints a trustee who is not the beneficiary to determine how to use the assets of the trust for the person with special needs
3. Trust is irrevocable
4. Distributions from the trust are entirely discretionary
5. Does not need a provision to pay back OHCA when the person with special needs dies

Exemption

1. The trust assets are not a countable resource for the person with special needs
2. Purchases by the trust for the person with special needs are not countable income with exceptions
3. Putting assets into a Third Party Special Needs Trust does constitute a transfer without commensurate return, and is therefore subject to the 60-month look-back, unless the trust qualifies as a “sole benefit” trust.
   • A sole benefit trust provides for the unpenalized (no look back) transfer of assets to a trust created for the sole benefit of a Medicaid applicant’s disabled child. 42 USC 1396p(c)(2)(B).
     • An individual shall not be ineligible for medical assistance by reason of paragraph (1) to the extent that…
     • (B) the assets…(iii) were transferred to, or to a trust (including a trust described in subsection (d(4)) established solely for the benefit of, the individual’s child described in subparagraph (A)(ii)(II), or

Limits to Exemption

1. Pays for food or shelter costs (see Countable In-Kind Income)
2. Distributes money to the person with special needs

Worker’s Responsibilities

• Needs to get a complete copy of the document that creates the Third Party Special Needs Trust
  • Legal Services needs to make sure the SNT meets all the required criteria from above
  • A copy of the Third Party Special Needs Trust does not need to be sent to OHCA
• The worker should be aware of the SNT while reviewing the client’s personal financial records, but does not request third party SNT records unless there is evidence of money being distributed from the SNT to the client.