Special needs trusts (SNTs) are created for people under age 65. Federal law lets you put your own funds into a trust that won’t penalize them for government benefits. The assets in the trust won’t be countable resources for Medicaid or SSI which are needs tested. If you apply for means tested benefits you must meet financial as well as medical qualifications. The financial is more problematic if you have assets, e.g. a tort recovery or other settlement. You can only have $2,000 of countable resources to qualify for Medicaid benefits. This does not include a home or prepaid funeral benefits. While settlements might sound “rich” to the unsophisticated the settlement might not last their entire lifetime. If Medicaid can pick up these benefits then the funds might last as a supplement.

A d4a or (d)(4)(a) trust is the federal law that refers to these first party trusts. On death of the person Medicaid has to get reimbursed up to the amount of Medicaid benefits paid for the person.

In contrast to a first party or (d)(4)(a) trust, there are also third party trusts which are different then the above. This is for example a trust that a parent or grandparent sets up a trust. There is no requirement for reimbursement to Medicaid. If the trust is done in that it inappropriately lists Medicaid as a beneficiary, you can try to reform it and correct the issue but that is tough to do. “Reformation” is the process of asking a court to change the trust to meet the wishes of the grantor, the person who set up the trust.