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Learn More About D(4)(a) Supplemental Needs Trusts

There are a number of different types of supplemental/special needs trusts in Florida (SNT) to be aware of. One class of SNT is generally referred to as a "First Party SNT", which are also known as "Payback Trusts."  First party SNTs are used in a number of scenarios but are typically used when a Medicaid/SSI recipient recieves some type of inheritance, recovery from a lawsuit or just has funds when they become disabled and need to keep or get SSI/Medicaid or other government benefits.  When a disabled person in this scenario receives Medicaid/SSI, he or she is only able to have $2,000.00 in countable assets in order to keep their necessary government benefits. 

The D(4)(a) SNTs has the following features:

  • disabled person under age 65 places their own money/inheritance/recovery from a lawsuit into this type of trust
  • this trust can be established by the disabled person (or their attorney-in-fact with the specific power to do so), their parent, grandparent, court appointed guardian or a court under very special rules
  • money is held for the disabled person and spent only for his or her benefit during their lifetime
  • a trusted person or professional trustee manages the funds (obviously, the disabled person cannot manage the trust funds)
  • when the disabled person dies, the assets in the trust are used to "payback" the State for monies paid to help the disabled person (i.e., via Medicaid) during his or her lifetime. If there are any funds left after paying off the State, funds can go to heirs.

Here is an example of someone needing a D(4)(a) SNT:

David, a 22 year old, is walking down the street and gets hit by a drunk driver.  David becomes disabled due to this unfortunate accident.  David does not have many funds and he applies for and receives SSI (and Medicaid) due to the accident.  David (or his guardian or power of attorney, etc.) sues the drunk driver and receives a settlement of $500,000 due to his injuries.  If David receives the $500,000.00 outright, it would take him off of Medicaid and SSI. David also has mental issues due to the accident as it resulted in a traumatic brain injury (TBI).  As the settlement would take David off of Medicaid/SSI and he is not able to handle his own funds, he or his family sets up the D(4)a Special Needs Trust, receiving the $500,000 and placing a trust company in charge of the settlement, as Trustee. During David's lifetime the Trustee can purchase a car, pay for rent and other expenses, pay for cell phones, care givers, vacations, and more, for David's benefit (under very specific rules).  David keeps his SSI and health insurance, importantly!  Only when David dies will assets in the trust first be used to "payback" the State of Florida for monies it has spent for his benefit, meaning David got the use of the funds for his lifetime, allowing a better lifestyle than without having these funds. 

In this example, we would typically look for this type of SNT, although a Pooled Trust could have been used as well.  We generally look to D(4)(a) trusts for larger recoveries/settlements/inheritances that would go to the beneficiary and take him or her off of Medicaid/SSI.

If you need help with setting up an SNT for yourself or your loved one, we are glad to help you and your family in this difficult time.

Christine O'Neil
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Estate Planning and Elder Law Attorney
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