The Social Security Act created the concept of a “Payback Trust”. See 42 U.S.C. §1396p(d)(4)(A). The parent, grandparent or guardian of an individual with a disability, or a Court can create a Payback Trust to protect the person’s eligibility for Medical Assistance, Waiver Services and Supplemental Security Income.
- An individual with a disability can add his or her assets to the trust and avoid unnecessary spend down.
- Trusts large enough to provide for all the supplemental needs of the individual with a disability and a complete pay back at death to the Pennsylvania Department of Public Welfare can direct residual funds to other family members.
Requirements of a Payback Trust
- Created by the parent, grandparent, or legal guardian of an individual with a disability, or by a Court.
- The beneficiary must be under 65 years of age when the trust is created.
The trust agreement provides for a “pay back” to the Pennsylvania Department of Public Welfare upon the death of the person with a disability.
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