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 Virginia.
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
Virginia Law
Va. Code Ann. § 64.2-779.10. Trust for beneficiary with disability.
B. A special-needs fiduciary may exercise the decanting power under § 64.2-779.8 over the income or principal of a first trust, including a first trust under which the fiduciary has only limited distributive discretion as defined in subsection A of § 64.2-779.9, as if the fiduciary had authority to distribute income or principal to a beneficiary with a disability subject to expanded distributive discretion if:
1. A second trust is a special-needs trust that benefits the beneficiary with a disability; and
2. The special-needs fiduciary determines that exercise of the decanting power will further the purposes of the first trust.
C. In an exercise of the decanting power under this section, the following rules apply:
1. Notwithstanding subdivision C 2 of § 64.2-779.8, the interest in the second trust of a beneficiary with a disability may:
a. Be a pooled trust as defined by Medicaid law for the benefit of the beneficiary with a disability under 42 U.S.C. § 1396p(d)(4)(C); or b. Contain payback provisions complying with reimbursement requirements of Medicaid law under 42 U.S.C. § 1396p(d)(4)(A).
2. Subdivision C 3 of § 64.2-779.8 does not apply to the interests of the beneficiary with a disability.
3. If no trustee or fiduciary has discretion under subdivisions 1 and 2, a trustee or other fiduciary, other than a settlor, that is required to distribute part or all of the income or principal of the first trust to one or more current beneficiaries.
“Special-needs trust” means a trust the trustee believes would not be considered a resource for purposes of determining whether a beneficiary with a disability is eligible for governmental benefits.
