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Navigating Special Needs Trusts in Ohio

by | May 29, 2024 | Estate Planning

Planning for the financial future of a loved one with special needs is a crucial aspect of caregiving. Special Needs Trusts (“SNTs”) are powerful tools designed to safeguard the financial well-being of individuals with disabilities while preserving their eligibility for government benefits. In Ohio, like many other states, there are various types of SNTs tailored to meet the unique needs of beneficiaries and their families.  In this guide, we’ll explore the different types of Special Needs Trusts available under Ohio law, offering insights to help you make informed decisions.

  1. Third-Party Special Needs Trust: A third-party SNT is established by someone other than the beneficiary, typically a parent, grandparent, or other family member. These trusts are funded with assets belonging to the grantor and can be created during the grantor’s lifetime or through their will. One of the significant advantages of third-party SNTs is that they allow the grantor to provide for the beneficiary without jeopardizing their eligibility for public benefits like Medicaid and Supplemental Security Income (SSI).
  2. First-Party Special Needs Trust (also known as a “Self-Settled” or “D(4)(A)” Trust): First-party SNTs are funded with assets belonging to the beneficiary, such as an inheritance, lawsuit settlement, or back payment of benefits. These trusts are established to hold the beneficiary’s own funds in a way that protects their eligibility for means-tested government benefits. In Ohio, first-party SNTs must adhere to strict rules outlined in federal and state law, including the requirement that the trust must be irrevocable and contain a payback provision to reimburse Medicaid upon the beneficiary’s death.
  3. Pooled Special Needs Trust: A pooled SNT is managed by a nonprofit organization that establishes and administers the trust on behalf of multiple beneficiaries. Each beneficiary has a separate account within the trust, but the assets are pooled for investment purposes, allowing for greater efficiency and cost-effectiveness. Pooled SNTs offer individuals with disabilities access to professional trust management and may be particularly beneficial for those who lack a suitable trustee or have smaller estates.
  4. Medicaid Payback Trust: In Ohio, Medicaid Payback Trusts, also known as “OBRA ’93” trusts, are first-party SNTs established for individuals with disabilities under the age of 65. These trusts are specifically designed to hold funds belonging to the beneficiary without affecting their eligibility for Medicaid. Upon the beneficiary’s death, any remaining assets in the trust must be used to reimburse Medicaid for the cost of care received during their lifetime.

Navigating the intricacies of special needs planning can be daunting, but understanding the different types of trusts available under Ohio law is a crucial first step. Whether you’re a parent, grandparent, or individual with disabilities, consulting with a qualified attorney who specializes in special needs planning is essential to ensure that your loved one’s financial future is secure. By leveraging the various types of special needs trusts available, you can create a comprehensive plan that protects assets, maximizes benefits, and provides peace of mind for future generations.

If you have questions about a Special Need Trust, contact John Tullio at 216-621-7860.

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