Social Security Disability Insurance (SSDI) is a program that is overseen by the Social Security Administration (SSA). SSDI is funded through payroll taxes, and a recipient is considered “insured” because that individual has a certain amount of work credits to receive benefits. Those work credits are earned by working for a certain number of years and paying into the Social Security trust fund via taxes paid.

After establishing the onset of a total disability, there is a five-month waiting period before the insured individual can receive SSDI benefits. However, there are a few exceptions to this waiting period. The first exception is for benefits for dependents of the disabled individual.

The second exception is for folks who are reinstating prior SSDI benefits. Meaning, the individual received benefits in the past but then went back to work and stopped receiving benefits. If benefits were once again needed due to the same disability, there wouldn’t be the five-month waiting period and the entire application process would not have to be redone.

Medicaid laws can be cumbersome and tricky. Federal statutes set out the framework for certain Medicaid eligibility rules, and states can interpret them differently. One such rule can be found in 42 U.S. Code § 1396p(d)(4)(C), which covers transfers to pooled trusts. Based on differing interpretations of this statute, some states impose a transfer penalty when an individual over age 65 transfers funds within the look-back period to a pooled trust; some states do not. Minnesota has the former rule, but in a recent case, it did allow a Medicaid applicant over age 65 to transfer funds into a pooled trust without the imposition of a transfer penalty.

In this case, David moved into a long-term care facility. His siblings sold his home. David petitioned a court to transfer his proceeds into a pooled special-needs trust. The court issued an order allowing the transfer. Disbursements from the trust were limited to the sole discretion of the Trustee, and they could only be made for items or services not covered by Medicaid. David was 65 years old at the time the funds were transferred to the pooled trust. Because Minnesota penalizes transfers to pooled trusts for folks 65 years and older, David was assessed a penalty period where he wasn’t eligible for long-term care Medicaid benefits. David appealed.

Trusts are certainly not the most perspicuous of legal inventions, but they can be a critical part of elder law planning and special needs planning. Experienced professionals understand the nuances of the various types of trusts available, what language is necessary, and which trust would benefit a client in a given circumstance. But for those of us who need a little refresher, let’s get back to the basics and take a dive into some of the lingo and concepts of special needs trusts.

What are Special Needs Trusts?