Persons with disabilities receiving cash or other assets — successful litigants in personal injury actions, for example — must take care to shelter the cash or assets received when they are also recipients of needs-tested public benefits such as Supplemental Security Income and Medicaid (known as “Medi-Cal” in California). This is due to a rule, typical of many programs, limiting assets for public benefits recipients to no more than $2,000, exclusive of certain exempt assets such as a car or residence. For a number of reasons, a litigant with disabilities will often elect to shelter the funds in a special needs trust. The successful litigant, establishing a special needs trust with his or her own assets, would be both the grantor (or settlor) and the beneficiary. The resulting special needs trust is referred to as a “first party,” “self-settled,” or “(d)(4)(A)” special needs trust.
There are two factors which limit access to this resource shelter. First, the person with disabilities must meet the strict Social Security test of disability, and second, the person must be under the age of 65. Therefore, an elderly person residing in a Medi-Cal funded nursing home, who recovers in a suit for nursing home abuse, for example, would ironically, upon receipt of the award, lose her Medi-Cal funding because her assets would exceed the resource limits, and an individual special needs trust would be unavailable due to age. Except for a narrow range of non-penalized transfers, that person would then need to spend down the assets to below the $2,000 asset limit before Medicaid long-term care would resume. A remedy is a self-settled (or first-party) pooled special needs trust.
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