Excerpt from: Medicaid Answers (click for full article)
There are three main types of special needs trusts a person can use to protect assets:
1) The Special Needs Trust (known as a “(d)(4)(A) trust” based on its designation under federal law) is a common trust used to protect lawsuit or insurance proceeds or inheritances for someone who is disabled and needs or may need long-term care. This trust must include a Medicaid payback provision at the death of the disabled beneficiary.
2) The Pooled Trust (authorized under (d)(4)(C)) also works similar to a (d)(4)(A) trust in that it is set up for individuals who are under 65 and disabled. The same types of assets can be protected in them, but the pooled trust is established by a charity which runs and administers the trust for a number of disabled beneficiaries. Some portion of the reminder is paid back to Medicaid when the disabled beneficiary dies and the rest is retained by the charity.
3) The Third-Party Special Needs Trust (often referred to as an “Amenities Trust”) is often established by parent or grandparent to leave assets in trust for the benefit of a disabled child or grandchild. The money or assets can stay in trust and does not qualify towards what has to be spent down to achieve Medicaid or SSI eligibility. The trust funds can be used to cover those things not covered by government assistance — referred to as amenities. Because it is set up by a third-party, the remainder in the trust fund can pass through to other heirs or beneficiaries at the death of the disabled beneficiary.