Tuesday, December 20, 2011



Many of our readers have asked us for more information about OBRA trusts. OBRA trusts were originally created for disabled people with long-term needs, so they could move into public aid facilities and have funds left for their special needs. An appropriate situation would be for a disabled child who received a malpractice award meant to cover long-term needs. In order to prevent the child's funds from being quickly drained by nursing home costs, OBRAs were created to allow the disabled child to be placed into a public aid facility, and have their estate available throughout their life for those things not provided by public aid. Once the OBRA is created though, private pay facilities are no longer an option for the child, in accordance with OBRA laws.

In many guardianship cases, these OBRA trusts are being abused. The elderly disabled are having their substantial estates (their hard-earned life-long savings) placed into OBRAs. Wards who lived at home or in beautiful private pay facilities prior to their guardianships have their funds placed into OBRAs (despite having enough funds to enjoy their private pay facilities for the rest of their lives), and are moved to less desirable public aid facilities (at the cost of the taxpayer). The wards' estates are then VERY quickly depleted by the guardians, GALs, and attorneys.

Unfortunately for the wards in Cook County, State Senate bill 2840 is going to allow this to continue.  Please read more here:


OBRA '93 Statutory Authority

1. Pursuant to Illinois Probate Act, 755 ILCS 5/11a-18(a-5(11) a guardian is required to investigate and pursue a ward's eligibility for government benefits.
2. Legislative History of the OBRA'93 Payback Trusts: On August 10, 1993, OBRA '93 became effective and, allowed for the creation of three types of disability trusts. 42 UCS section 1396p(b). On July 26, 1994, Illinois enabling legislation became effective mandating the Illinois Dept. of Public Aid (IDPA) to comply fully with federal law. Illinois Public Aid Code, 305 ILCS 5/5-2.1a. On February 27, 1995, IPDA promulgated regulations providing for the state's implementation of (d)(4)(A) and (d)(4)(C). 89 Illinois Administrative Code sections 120.347(d)(1) and (2) (1995). Effective January 1, 1996, the Illinois and Trust and Trustees Act was amended to provide for disability trusts 760 ILCS 5/15.1.
3. To be a beneficiary of an OBRA '93 Payback Trust, an individual must be disabled as defined from the Social Security Administration at: 42 U.S.C. 1382c(a)(3)(A) which provides in relevant:
A person shall be considered disabled if he or she is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or last for a continuous period of not less than twelve months."
4. The Omnibus Budget Reconciliation Act of August 10, 1993 (OBRA '93) provides for the creation of a "payback" trust (OBRA '93 (d)(4)(A) as follows:
A trust containing the assets of an individual under age 65 who is disabled (as defined in section 1382c(a)(3) of this title) and which is established for the benefit of such individual by a parent, grandparent, legal guardian of the individual, or a court if the State will receive all amounts remaining in the trust upon the death of such individual up to an amount equal to the total medical assistance paid on behalf of the individual under a State plan under this subchapter.
5. The Omnibus Budget Reconciliation Act of August 10, 1993 provides for the creation of a "payback" trust (OBRA '93 d)(4)(c) as follows:
C) A trust containing the assets of an individual who is disabled (as defined in section 1382c (a)(3) of this title) that meets the following conditions:
(i) The trust is established and managed by a non-profit association.
(ii) A separate account is maintained for each beneficiary of the trust, but, for purposes of investment and management of funds, the trust pools these accounts.
(iii) Accounts in the trust are established solely for the benefit of individuals who are disabled (as defined in section 1382c (a)(3) of this title) by the parent, grandparent, or legal guardian of such individuals, by such individuals, or by a court.
(iv) To the extent that amounts remaining in the beneficiary's account upon the death of the beneficiary are not retained by the trust, the trust pays to the State from such remaining amounts in the account an amount equal to the total amount of medical assistance paid on behalf of the beneficiary under the State plan under this subchapter.
6. The Illinois Dept. of Public Aid Policy Manual, 07-02-15b exempts trusts created under OBRA '93.

Although the OBRA laws were created for the purpose of providing for a high quality life for the ward while on public aid, this is not occurring.  Many elderly wards' estates are placed into OBRA accounts, and these substantial estates are rapidly depleted by the guardians and attorneys, with the approval of certain judges, rather than being spent on the wards special needs.

Below is a comprehensive list of what is allowed by law to be paid from OBRA trusts, FOR THE BENEFIT OF THE WARD.


The Trustee(s) of a Pooled Account Trust may utilize any of the foregoing listing for expenditures from the Trust. The following list of non-support items is provided for purposes of description and shall not limit the Trustee(s) in making other distributions for other
Accounting/ Professional Services

Acupuncture/Acupressure, Holistic Therapies, elective surgeries not covered by Medicaid

Alterations or mending to clothing, shoe repair

Appliances (TV, DVD player, WII, IPOD, Microwave, Stove refrigerator, washer/dryer including maintenance/repairs)

Assistive Technology

Bottled Water or water service

Bus pass/public transportation costs

Cable TV

Camera, film, reorder and tapes, development of film, photo albums, scrapbooks and supplies

Caregivers, Care Managers/Case Management Services

Clothing, coats, shoes

Clubs and club dues, membership (record clubs, book clubs, health clubs, service clubs, zoo, Advocacy Groups, museums)

Companion Services

Computer hardware, software, program, maintenance and internet service

Conferences and the travel costs

Courses, trainings or classes (academic or recreational) including the course supplies

Curtains, blinds, drapes, or paint for decorating room or home

Dental work not covered by Medicaid, including anesthesia

Down payment on home or security deposit on apartment (Non SSI recipients)

Dry cleaning /laundry services for the beneficiary
Fitness equipment, athletic gear

Funeral expenses- Prepaid during the life of the beneficiary ($5703) limit plus hardware item costs with the exception of irrevocable insurance policies)

Furniture, home furnishings and insurance

Gasoline, Maintenance and upkeep of automobile

Guardianship Services

Haircuts/Salon/ Hair stylists

Holiday Decorations, parties, dinner dances, holiday cards

Home alarm and/or monitoring/response system

Home improvements, repairs and maintenance (not covered by Medicaid). Including tools to perform home improvements, repairs and maintenance by homeowner

Home Purchase for the beneficiary (Deed must be in Beneficiary’s name, Beneficiary must reside in the home full time)
Home cleaning/maid services/lawn services/snow removal
Independent evaluations

Inexpensive Gift purchase ($50 limit/ $600 per year maximum) for immediate family members for birthdays, Xmas, Hanukkah, Kwanzaa, graduations, births, weddings, and anniversaries.
Insurance (automobile, home and/or rental insurance for possessions)

Insurance Co-Payments not covered by Medicaid Private insurance

Legal Fees/

Life Insurance (maximum value $1500)

Linens, towels, bedding, area rugs and household furnishings

Massage, facials and other similar spa services/treatments
Musical instruments (including lessons and music sheets)

Non-food grocery items (laundry soap, bleach, fabric softener, deodorant, dish soap, hand and body soap, personal hygiene products, paper towels, napkins, kleenex, toilet paper, and any household cleaning products) Wards in public aid nursing homes may not have additional food paid for with their own estate funds (per OBRA laws)------it's strictly institutional food once the OBRA occurs.

Over the counter medications and supplies (including vitamins and herbs, etc)

Personal Assistance Services not covered by Medicaid

Pet and pet’s supplies including veterinary services

Phone service (Cell/ Home)
Physician specialists if not covered by Medicaid

Private counseling, psychotherapy, psychiatrist costs not covered by Medicaid

Repair services (appliances, automobile, bicycle, household, fitness equipment)

Snow removal /Landscaping/Lawn Service

Sporting goods/equipment/uniforms/team pictures/travel to games/tournaments

Stationary, stamps, cards, paper supplies etc.

Storage Units for beneficiary

Taxi cab/ Limo service
Therapy (Physical, Occupational, Speech), not covered by Medicaid

Testing for any purpose (vocational, medical, psychological)

Tickets to concerts, sporting events (for beneficiary and one companion)
Transportation, (automobile, motorcycle, bicycle, moped, gas, bus passes)

Utility bills (electric, heating)- Not for SSI beneficiaries

Vacation costs (including paying for personal assistance to accompany the beneficiary) .

Examples of Distributions that may NOT be paid by the trust

Direct cash disbursements to the beneficiary or third parties

Paying for a service already paid for by another source or any double payments by the trust that would supplant public benefits. This means that if ward is in need of nursing home placement, it must be a public aid facility, since the OBRA allowed the ward to qualify for medicaid. They cannot, by law, use their estate for a nicer private pay facility.

Distribution not in the best interest of the beneficiary (made primarily for the benefit of another person) Sole Benefit Rule

No Funeral lunches, dinners or meals can be paid for by the beneficiary through the trust

Payment of third party debts not owed by beneficiary

Payments to residual beneficiaries before trust is closed and all Medicaid debts are paid in full.

More about OBRAs can be read at this comprehensive website:


Resources are available at :

Pooled Trust Programs for People with Disabilities: A guide for Families by The Arc, 2002, available at this site. It is a 16 page guide with an overview of pooled trusts, public benefits, principles and rules with descriptions of the many types of Special Needs Trusts and a complete listing of pooled trust programs in the US in 2002.


Special Needs Alliance Trustee Handbook

Have you been named as trustee of a special needs trust? Have you created a special needs trust, and wonder what the job of trustee is actually like? Are you a trust beneficiary, trying to figure out what the trustee is permitted -- and required -- to do? The Special Needs Alliance is pleased to offer its free booklet on administering special needs trusts. In plain English, it can help you understand the choices and obligations.


The four banks in Illinois which provide OBRA Special Needs Pooled Trusts are:

DayOne Reliance, Inc., Co-Trustee together with Great Banc Trust

Illinois Disability Association, Co-Trustee together with Bank of America (LaSalle Bank)

Options for Living (previouisly through American Bank & Trust; now through Fifth Third Bank)

Life's Plan, Inc., Co-Trustee with Great Banc Trust


These trusts should meet the Social Security Administration POM SI 01120.201 rules and federal regulations under 42 U.S.C. Section1396p (d)(4)(A), (d)(4)(c). The trust should be reviewed and approved by the Social Security Administration, VA Administration, and the Illinois Department of Healthcare and Family Services.

As described in the above resources, the ethical use of OBRAs can help disabled people, especially young children whose funds must last a lifetime. Unfortunately, these trusts are often abused in guardianship proceedings for elderly wards.  The elderly wards, whose estates are large enough to cover the cost of private pay facilities through the rest of their lives, are needlessly placed into public aid facilities and their estates are placed into OBRA trusts.

Not only do the public aid facilities not meet the wards' needs, but the taxpayers are footing the bill, and our current shortage of public aid nursing home beds in Illinois is being exacerbated by the probate court.

If your loved one's estate has been depleted predominantly for guardian's fees and legal fees, rather than for supplemental needs of the wards, please share your story with us and leave a comment.  While providing the probate court case number and nursing home information is helpful, anonymous comments are welcome.  Comments will not be posted unless requested.

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