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1st party trust - Resources from an individual’s own resources (disabled individual can be any age)

3rd party trust (Friends and Family) - resources from a family member or outside source

After fund – Upon death of the beneficiary any money remaining in his/her trust account will be transferred to the after fund. The after fund can be used to benefit other disabled individuals.

Beneficiary - The person with a disability who benefits from the trust. The beneficiary must have a diagnosis of intellectual or other developmental disability for purpose of eligibility.

Disabled - physically or mentally impaired, injured, or incapacitated. You are considered disabled under Social Security rules if:
  • You cannot do work that you did before;
  • They decide that you cannot adjust to other work because of your medical condition(s); and
  • Your disability has lasted or is expected to last for at least one year or to result in death.

Donor/Grantor/Settlor - The person setting up the trust

Executor/Executrix - The person responsible for collecting, maintaining and distributing the assets of an estate in accordance with the terms of the will. A male is referred to as an executor and a female is referred to as an executrix.

Irrevocable Trust - A trust that cannot be modified or terminated without the permission of the beneficiary. In most states, a trust will be deemed irrevocable unless the grantor specifies otherwise. Once the grantor has transferred assets into the trust, s/he has no rights of ownership to the assets and the trust. Irrevocable trusts are preferred because it removes all incidents of ownership, thereby effectively removing the trust's assets from the grantor's taxable estate. The grantor is also relieved of the tax liability on the income generated by the assets. This is the opposite of a "revocable trust", which allows the grantor to modify the trust.

Joinder Agreement - The Legal Document that is executed by the grantor to establish an account.

OBRA ’93 – The Omnibus Budget Reconciliation Act of 1993. It authorized the establishment of certain types of supplemental needs trusts, including pooled trusts, which are managed by non-profit corporations for the benefit of individuals with disabilities.

Payback Trust – A trust permitted by federal law that enables a disabled beneficiary, under age 65, to protect his or her own assets by transferring them to a supplemental needs trust and still qualify for governmental benefits, such as SSI or Medicaid. Upon the death of the beneficiary, the state has the right to be reimbursed for the amount of correctly paid Medicaid benefits on behalf of the beneficiary. Any remaining trust assets in excess of the payback amount may be distributed as designated where the trust is set up.

Pooled Trust - Established and maintained by non-profit associations. Separate accounts for each beneficiary are maintained, but the funds are pooled for investment purposes.

Self-settled Trust- A type of Supplemental Needs Trust. An inter vivos by which the beneficiary’s own assets are used to fund the trust. Typically the money used to fund the trust is received by a person with a disability as a result of a court order, inheritance, life insurance payout, a medical malpractice or personal injury action. This type of trust is established for the benefit of an individual with disabilities and is funded by that person’s own assets. This is commonly referred to as a “payback,” “self settled” or “OBRA Trust” having been authorized by the Omnibus Budget Reconciliation Act of 1993.

Social Security Law Section 1614(a)(3) [42 USC §1382c(a)(3)] – This is the section of federal law that essentially defines “disabled.” To summarize, a person is disabled under this law if, because of an anatomical, physiological or psychological abnormality that will last more than 12 months or will lead to eventual death, and which prevents that person from holding employment. It covers physical, intellectual, and developmental disabilities. %u200B

Supplemental needs Trust (or Special Needs Trust or SNT) – A trust that provides funds to a fiduciary for the benefit of a person with a disability. The assets of a Supplemental needs Trust are not considered as “available assets or resources” for the purpose of determining whether a person shall be eligible to receive governmental benefits. An SNT may be funded by a third party, such as a parent, grandparent, friend, or relative. This type of trust is commonly referred to as a “Third Party Trust.” An SNT may also be established using the funds of the beneficiary with a disability. SNT funds are intended to supplement, not replace, governmental benefits programs such as Medicaid and SSI. An SNT enhances the beneficiary’s quality of life through the purchase of additional support services, social and recreational opportunities, advocacy, guardianship and medical services and equipment that are not otherwise covered or adequately provided through state and federal benefit programs.

Testamentary Trust – A trust established under a will.

Testator/Testatrix – A person, man or woman, who has died leaving a valid will.

Third Party – This means that the settlor and beneficiary are different parties.

Trust – A legal device created by a person, called the “settlor, grantor, or donor,” who places money or other property in the hands of another party (the “fiduciary”). The money or property can be used only for the benefit of the beneficiary.

Trust Agreement – The legal document establishing the trust and containing the instructions to be followed by the trustee in administering the trust. These instructions might include rules on how the trust corpus should be spent during the beneficiary’s lifetime, under what circumstances that principal can be invaded, and who receives any corpus remaining at the death of the primary beneficiary.

Trustee – A person or a legally established entity that has legal title to property, holds it in trust for the benefit of another and owes a fiduciary duty to the beneficiary to follow the terms of the trust and applicable state law. A breach of fiduciary responsibility would make the trustee liable to the beneficiaries for damage caused by the breach.