JurisdictionUtah,United States
CitationVol. 36 No. 4 Pg. 20
Publication year2023
Vol. 36 No. 4 Pg. 20
Utah Bar Journal
August, 2023

July, 2023

Drafting a Special Needs Trust in Utah: A Primer

by Kathie Brown Roberts and Allison Barger

This article is the first part in a two-part series exploring required provisions of special needs trusts, Utah specific requirements, and common drafting errors as highlighted by a policy specialist at the Utah Department of Health and Human Services. The second part of the series of articles will focus on the public benefits available to disabled individuals in Utah, program parameters for such benefits, and how to qualify for available benefits.

General Overview and History of SNTs

Special Needs Trusts (SNTs) were first authorized in the 1993 Omnibus Budget Reconciliation Act (OBRA '93) as set forth in 42 U.S.C § 1396p(d)(4)(A), allowing the establishment of excluded trusts for disabled recipients of means-based governmental benefits.

Means-based public benefits are a category of public benefits that require an applicant to qualify financially and (usually medically) before receiving the benefit. Typically, means-based benefit programs look at both the income and assets of an applicant to determine whether they are eligible to receive the benefit. The most common means-based public benefits are the Medicaid and Supplemental Security Income (SSI) programs. In Utah, qualification for SSI will usually result in qualification for Medicaid benefits. The Veterans Administration also offers the Improved Pension program (Aid and Attendance) to eligible veterans and spouses of veterans, which is also means-based. Utah has several ancillary public benefits programs that are means based, covered in part two of this series.

Prior to the enactment of OBRA '93, a means-based beneficiary's receipt of an inheritance or a personal injury settlement would prevent that beneficiary from qualification under SSI and Medicaid because their assets would be considered "countable" for those programs. After OBRA '93, a parent, grandparent, legal guardian of the individual, or a court could create a SNT to hold the assets of the beneficiary. The assets within the SNT would not be considered "countable" for such programs and would not impact the beneficiary's means-based benefits. As of December 13, 2016, a person who is mentally capable (but satisfies the government's definition of "disabled") can establish their own first-party SNT.

Another type of SNT created by OBRA '93 was the "Pooled Trust," under 42 U.S.C § 1396p(d)(4)(C), more fully described below, but created a means of pooling assets of disabled individuals for investment purposes in a trust established and managed by a non-profit corporation.

For the purposes of OBRA '93, a "disabled individual" is an individual "unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve months." 42 U.S.C. § 1382c(a)(3).

Types of SNTs and Utah Specific Language

The primary distinction between a first-party and third-party SNT is the origin of the assets composing the corpus of the trust and the obligation of a first-party SNT trustee to repay Medicaid upon the death of the trust beneficiary. A first-party SNT and a pooled trust may hold assets belonging to a disabled individual. A third-party SNT holds assets belonging to/or originating from someone other than the disabled individual. Assets held by properly drafted SNTs will not be countable for qualification for means-based public benefits.

KATHIE BROWN ROBERTS is a Certified Elder Law Attorney by the National Elder Law Foundation and the only Utah member of the Special Needs Alliance, an invitation-only national alliance of Special Needs Practitioners. She practices estate planning, special needs planning, and adult guardianships.

ALLISON BARGER is an associate attorney at Kathie Brown Roberts, PC in Sandy, Utah, and practices in the areas of estate planning, special needs planning, adult guardianship, and estate administration.

First-Party SNTs

The requirements for a first party SNT are specific. A properly drafted first-party SNT in Utah requires familiarity with four sources of authority: (i) 42 U.S.C § 1396p(d)(4)(A); (ii) Utah Code § 26B-6-412; (iii)...

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