What are Payback Trusts?
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.
Once the Payback Trust is created, the individual with a disability can add their assets to the Payback Trust. In this way, the individual can save funds rather than spend down for unnecessary things just to preserve eligibility for essential supports and services.
The assets in the Payback Trust are used for the benefit of the individual with a disability - to improve his or her quality of life.
If all the funds in the Payback Trust have not been spent by the time the individual with a disability dies, the remaining money is used to “pay back” the Pennsylvania Department of Human Services for the cost of providing Medical Assistance to the individual. If any money remains after the “pay back”, the trust agreement will direct the trustee how to distribute those funds.
ACHIEVA Family Trust serves as trustee or co-trustee of Payback Trusts. ACHIEVA Family Trust adds case management and social work expertise to the traditional role of corporate trustee.
Advantages of a Payback Trust
- 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 Human Services 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 Human Services upon the death of the person with a disability.