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 Arizona.
Federal Law
(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
Arizona Law
There are two Medicaid agencies in Arizona: the Arizona Health Care Cost Containment System and the Arizona Long Term Care System.
There are two common types of special needs trusts. A first-party trust requires the assets to come from the beneficiary, for example, in instances of an injury settlement. The remainder of that trust typically reimburses the government for what it has paid. In other words, the beneficiary may continue to receive SSI and Medicaid and get the benefit of the assets placed into the trust; but upon death, the state is paid back first out of the trust assets.
A person’s family creates a third-party trust to ensure he or she receives the present and future care they would want. Parents who set up a third-party trust have more control over the balance than with a first-person trust. Like with other types of trusts, the remainder could be allocated elsewhere at their discretion.
