SPECIAL NEEDS TRUSTS UNDER 42
Back to GlossaryDefinition
Considered to be self-settled in nature, are typically established by the special needs person's parent, grandparent, legal guardian or by a court and will avoid disqualification of Medicaid and SSI benefits.
Summary
Special Needs Trusts Under 42 (referring to 42 USC 1396p(d)(4)) are legally structured trusts that allow disabled individuals to preserve assets while maintaining eligibility for government benefits like Medicaid and SSI. These 'first-party' trusts are funded with the disabled person's own money but must be established by specific authorized parties (parents, grandparents, guardians, or courts) rather than the disabled person themselves. The key benefit is that assets in these trusts don't count against benefit eligibility limits, allowing disabled individuals to have supplemental resources for needs not covered by government programs.
Usage Context
Critical when studying estate planning for disabled individuals, Medicaid planning, government benefits preservation, and trust administration. Essential for understanding how families can provide financial security for disabled relatives without jeopardizing their access to vital government assistance programs.
Common Confusions
- Thinking the disabled person can establish their own Special Needs Trust Under 42
- Confusing first-party (Under 42) with third-party special needs trusts
- Not understanding the Medicaid payback requirement upon beneficiary's death
- Assuming all trust disbursements are permitted without affecting benefits
- Mixing up Special Needs Trusts with regular disability trusts
