ALABAMA FAMILY TRUST
by Clayton Davis, Attorney at Law and President of the
Board of Trustees of the Alabama Family Trust
The Alabama Family Trust is established by Alabama statute
to manage a pooled special needs trust through the Alabama
Family Trust Corporation to provide a means for beneficiaries
of any age who have mental, intellectual, or physical disabilities
to have the benefit of the use of a trust funded by their own
money or by money from family members or other third parties
to supplement what is already covered by government benefits
and still retain or become eligible for SSI, Medicaid, including
nursing home Medicaid, Medicaid waiver, Medicaid for
children who became disabled prior to age 22, but lost their SSI
eligibility solely because they became eligible for Social Security
disability benefits when a parent became eligible for Social
Security benefits, and certain other means-tested government
programs. Note, however, that if the only Medicaid benefits
received by the beneficiary is QMB, SLMB, or QI, no special
needs trust is needed because in Alabama these programs have
no asset limitations for eligibility and are exempt from Medicaid
estate recovery under a recent state law but would be subject
to Medicaid payback from funds in a special needs trust that
remain at death.
In some cases, an individual with disabilities who is already
eligible for SSI, Medicaid, or some other means-tested program
receives a settlement, verdict, alimony, child support, long-term
disability insurance payments, or inheritance that if left in the
name of the individual would cause disqualification from these
programs.
In other cases, an individual may have some existing savings, but
an income below the limit for SSI, or some other means-tested
program. The individual could become eligible for Medicaid
by spending all the savings on medical expenses that could have
been covered by Medicaid, after which he or she would have
no funds to pay for medical expenses, such as dental, hearing,
vision, private room at a nursing home, the costs of sitters
beyond what is provided under Medicaid waiver, or to purchase
a vehicle or a prepaid funeral and burial arrangement.
In all these cases, Federal law allows the individual to place
these funds in a first-party pooled special needs trust such as
the Alabama Family Trust without losing these benefits, and
to use these funds through the trust to pay for things and that
individual needs or wants that would improve his or her quality
of life that are not otherwise covered by SSI, Medicaid, or other
government benefits.
If the source of the funds for the trust is the individual (or his
or her spouse during the spouse’s lifetime) who will be the life
beneficiary of the pooled special needs trust, then the trust is
considered a first-party special needs trust, and the balance,
if any, remaining in the trust at death is required by federal
law to be used to repay Medicaid for benefits incurred by the
individual during his or her lifetime before the balance, if any,
is distributed to the remainder beneficiaries named in the trust.
80 Senior Resource Directory 2020-2021
If, on the other hand, the source of the funds is someone
other than the individual life beneficiary of the trust or is a
testamentary special needs trust of the spouse, then the trust is
considered a third-party special needs trust, and no repayment
to Medicaid is required at the death of the life beneficiary. This
is especially useful for parents and grandparents who want
to supplement the support for a disabled child or grandchild
without jeopardizing the beneficiary’s SSI or Medicaid eligibility.
The Alabama Family Trust Corporation serves as trustee
and manages approximately $30 million dollars in assets for
hundreds of Alabama persons with disabilities. A person other
than the individual life beneficiary or his or her spouse must
be named by the settlor of the trust to serve as representative,
who is then allowed to request payment on behalf of the life
beneficiary for goods and services that would improve the life
of the life beneficiary, but that are not otherwise covered by
government benefits. All distributions from the trust must
be for the sole benefit of the life beneficiary and must be
authorized by the Alabama Family Trust Corporation as trustee.
In cases in which the life beneficiary is eligible for SSI, the trust
cannot be used to pay for food and shelter costs. Some of the
common items that can be paid from the trust are telephone
and cable charges, transportation, private room changes in the
nursing home that are not paid by Medicaid, prepaid funeral
and burial arrangements, a vehicle and the expenses associated
with the operation of the vehicle, dental and hearing services,
special schooling, furniture, clothing, hair care, storage charges,
additional sitters to care for the life beneficiary at home that are
not already provided through the Medicaid waiver, the upkeep
of property that is subject to a Medicaid lien while it is on the
market for sale, and the nursing home charges that must be paid
by the life beneficiary during a Medicaid penalty period caused
by a prior uncompensated transfer of assets during the five years
prior to an application for nursing home Medicaid benefits.
The Alabama Family Trust accepts trust of as little as $1500 as
an initial deposit. In the case of a first-party special needs trust
that will be funded by assets of the life beneficiary, the trust
must be established while the life beneficiary still has funds to
place in the trust.
If the trust documents will need to be signed by the agent under
a power of attorney or by a conservator, the power of attorney
or court order must include the specific power to create the
special needs trust.
For more information on how to establish a special needs trust
for yourself, for a disabled parent, child, grandchild, or other
family member, or for someone for whom you serve as agent
under a durable power of attorney or as conservator, telephone
Clayton Davis at 334-303-7900, visit www.alabamafamilytrust.
com, or contact the Alabama Family Trust at 844-238-4630.
/www.alabamafamilytrust
