A special needs trust is established to prevent people from losing benefits from certain government programs after receiving a settlement. An influx of wealth can make one ineligible for benefits from Supplementary Security Income (SSI), Veterans Aid and Attendance, Medicaid, and government housing. A special needs trust supplements but does not replace, these benefits by paying for non-covered services or equipment. Below are the applicable laws to establishing a special needs trust in Colorado.
Federal Law
U.S. Code Section 1396p.(d)(4)(A)
(4) This subsection shall not apply to any of the following trusts:
(A) A trust containing the assets of an individual under age 65 who is disabled (as defined in section 1382c(a)(3) of this title) and which is established for the benefit of such individual by the individual, a parent, grandparent, legal guardian of the individual, or a court if the State will receive all amounts remaining in the trust upon the death of such individual up to an amount equal to the total medical assistance paid on behalf of the individual under a State plan under this subchapter. Full text
Colorado Law
Under C.R.S. § 15-14-412.8, a “disability trust” is a trust established for a disabled individual under age 65. It consists of his or her assets and is established to maintain resource eligibility for medical assistance. To do so, the trust must meet all the following criteria. The trust is funded by assets of an individual under age 65 who is disabled as defined in 42 U.S.C. sec. 1382c(a)(3). It is established by the individual, parent, grandparent, guardian, or the court. Upon the death of the beneficiary or termination of the trust during the beneficiary’s lifetime, whichever occurs sooner, the department of health care policy and financing will receive any amount remaining in the trust up to the total medical assistance paid on behalf of the individual.
The sole lifetime beneficiaries of the trust are the individual for whom the trust is established and the state medical assistance program. After the death of the person for whom the trust is created or after the trust is terminated during the beneficiary’s lifetime, whichever occurs sooner, no person is entitled to payment from the remainder of the trust until the state medical assistance agency has been fully reimbursed for the assistance rendered to the person for whom the trust was created.
To be valid, the department of health care policy and financing must review the trust and determine that it conforms to all requirements and any rules adopted by the medical services board pursuant to section 25.5-6-103, C.R.S.
