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Disability Trusts (Medicaid Payback Trusts)

A Disability Trust can be established for the sole benefit of a disabled beneficiary who is under the age of 65.  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 any Trust funds remain after Medicaid is reimbursed, those funds can be distributed to the beneficiary’s heirs or the beneficiary’s estate.

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