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Disability Trusts (Medicaid Payback Trusts)

A Disability Trust can be created for the sole benefit of a beneficiary who is under the age of 65 and meets the Social Security Administration’s disability criteria.  Disability Trusts can only be funded with the beneficiary’s own assets.  Personal injury settlements, worker’s compensation settlements, and inheritances are often used to fund Disability Trusts.   Federal and state laws require Disability Trusts to be established by the beneficiary or the beneficiary’s parent, grandparent, legal guardian, or a court.  Disability Trusts must contain language stating that when the beneficiary passes away, the trustee is required to reimburse Medicaid for all assistance it paid during the beneficiary’s lifetime. If there are any Trust funds remaining after Medicaid is reimbursed, those funds can be paid to the beneficiary’s estate.

Colorado’s Medicaid regulations state that any Disability Trust created for the benefit of a Medicaid beneficiary must be submitted to the Colorado Department of Health Care Policy and Financing for review and approval.