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A Payback Trust is sometimes referred to as a "stand alone trust” as each trust is individually drafted and will be received separately by the government. If the individual is ineligible, the delay in preparation and approval can be costly. Each trust will need a trustee which could be a family member, a for-profit corporate fiduciary or a non-profit corporate fiduciary. Each trust bears its own operating costs.
Requirements for a Payback Trust
1. It is for the benefit of an individual under 65 years of age.
2. The beneficiary is disabled as defined in 42 USC 1382 c(a)(3).
3. The trust is established by a parent, grandparent, legal guardian or court.
4. At the beneficiary's death, any residual funds are first used to payback the state for Medical Assistance received.
Other Notes about a Payback Trust:
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This trust can be self-funded but not self-created.
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It can be self-funded since funds that the individual has received can be placed in the trust and they no longer render the individual ineligible.
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It cannot be self-created since the individual is not authorized by statute to establish a trust. If the individual has no guardian, parents or grandparents, a court would be needed to establish the trust.
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There is a possibility, usually remote, that after the beneficiary's death, the Commonwealth or State can be repaid and funds will remain to be disbursed. Obviously, the longer the beneficiary lives and the higher the costs for Medical Assistance, the possibility of remaining funds are reduced.
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