Congress Passes Special Needs Trust Law -
And Fixes 23 Year Old Error
Congress took a big step forward to improving the lives of individuals with disabilities last month. On December 7, 2016, the U.S. Senate approved the Special Needs Trust Fairness Act, which now passes on to the President for his signature. The Act corrects an error in the current law that has caused difficulties and created unnecessary delays and expenses for many disabled individuals for over 20 years.
Congress initially established rules for special needs trusts back in 1993. A common type of such a trust is called a “self-settled” special needs trust, or a d4a trust, which refers to the subsection of the federal law that established it, 42 USC 1396p(d)(4)(a). This type of trust is most frequently created when an individual with disabilities has too many assets and, therefore, ineligible for Medicaid and/or Social Security benefits. The self-settled special needs trust is established using the disabled person’s own funds, which would then allow him or her to become eligible to receive or continue receiving crucial Medicaid and Social Security benefits while protecting his or her savings to pay for necessary living expenses.
So what was the problem all these years? A drafting error in the 1993 law prevented individuals with disabilities from creating their own self-settled special needs trusts. The law presumed that a disabled individual lacks the mental capacity to handle this aspect of his or her own financial affairs, and provided that only a parent, grandparent, legal guardian, or court had the authority to create one on the disabled individual’s behalf.
The new law recognizes that this presumption doesn’t make sense, and authorizes capable individuals with disabilities to create their own self-settled special needs trusts, without placing unnecessary burdens on the individuals themselves, their families, or their savings.
If you would like more information on the Special Needs Trust Fairness Act or have questions regarding planning options for loved ones with disabilities, the attorneys at the Nawrocki Center for Elder Law, Special Needs & Disability Planning, PLLC, are happy to provide you with expert advice.
s -Lisa H. Beatty
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