Understanding the Impact of OBRA 93 Trusts on Special Needs Planning in California

Special needs planning is an essential process for individuals with disabilities, aiming to secure their financial future and access to necessary care. With the recent changes in California’s Medi-Cal program, particularly the elimination of the asset test effective January 1, 2024, there is a significant shift in the landscape of special needs planning. One of the most notable introductions is the OBRA 93 Trust, a tool that offers new possibilities and considerations for individuals and their families.

The Shift from Asset-Based to Income-Based Eligibility

Historically, eligibility for Medi-Cal, California’s Medicaid program, was determined by strict asset limits. This meant that individuals with disabilities had to carefully manage their assets to qualify for vital health coverage. Special Needs Trusts (SNTs) were commonly used to protect assets while maintaining eligibility. However, with the removal of the asset test, the focus has shifted to income-based eligibility. This change underscores the importance of understanding the various Medi-Cal categories and income rules to ensure continued access to benefits.

What Are OBRA 93 Trusts?

Despite sharing a name with federal law, OBRA 93 Trusts are unique to California law and serve different purposes than traditional SNTs. These trusts break away from the limitations of standard SNTs by providing more flexibility. For instance, they do not require a payback to the state for benefits received, which can be a significant advantage for estate planning.

Key Considerations for Using OBRA 93 Trusts

When considering an OBRA 93 Trust, it’s crucial to understand the specific issues related to special needs planning. Planners must have a deep knowledge of the exact Medi-Cal program the individual is enrolled in to avoid jeopardizing their eligibility. Additionally, while OBRA 93 Trusts elevate the relevance of direct asset ownership, they also introduce nuanced limitations that must be carefully navigated.

Estate Planning and Medi-Cal Estate Recovery

Proper estate planning remains a critical component of special needs planning. Tools like Revocable Living Trusts can help bypass Medi-Cal’s estate recovery rules, ensuring that the individual’s estate is protected from claims for repayment of medical expenses.

Case Studies: When to Use OBRA 93 Trusts

The introduction of OBRA 93 Trusts presents new scenarios for special needs planning. For example, an adult with disabilities receiving a substantial settlement may benefit from an OBRA 93 Trust if they have the capacity to manage their own affairs. This trust could provide them with more autonomy over their funds without the requirement of a state payback.
Conversely, for minors with special needs or adults with limited capacity, a third-party SNT remains the preferred strategy to ensure protection of assets and eligibility for public benefits.


The changes to Medi-Cal’s eligibility criteria, including the introduction of OBRA 93 Trusts, represent a significant evolution in special needs planning. As we navigate this new terrain, it’s imperative for individuals, families, and planners to stay informed and consider all available tools to create the most effective plans for those with special needs. With careful consideration and expert guidance, OBRA 93 Trusts can play a pivotal role in enhancing the quality of life for individuals with disabilities in California.