Congress has just enacted legislation that allows disabled beneficiaries of means tested programs such as Medicaid and Supplemental Security Income (SSI) to establish their own special needs trusts. Until now, such trusts had to be established by persons other than the disabled individual even when the trust’s funding source was the disabled individual’s own assets. The new law, known as the Special Needs Trust Fairness Act, changes that and allows such trusts to be established by the disabled individual herself.
By way of background, government benefit programs such as Medicaid and SSI limit eligibility to persons with no more than $2,000.00 in countable assets. Special needs trusts are established to enable disabled persons to utilize funds in excess of the $2,000.00 limit to pay for expenses that are not covered by the means tested programs without disqualifying the trust’s beneficiary from receipt of government benefits. Family members or other third parties can establish such trusts using their own assets; these trusts are referred to as third-party special needs trusts. Trust which are established with the disabled individual’s own funds are known as first-party special needs trusts and it is these trusts to which the new legislation applies. Until now, a disabled beneficiary could not establish a first-party special needs trust; such a trust could only be established by the beneficiary’s parent, grandparent, guardian or a court. The new legislation changes this and allows a disabled individual to establish his or her own special needs trust without the assistance of his or her parent, grandparent, guardian or a court.
This new legislation was promoted by disability advocates who believed the previous restriction unfairly complicated disabled individuals from establishing a special needs trust with their own funds. Such individuals can now establish a first-party special needs trust with their own assets and without the need of assistance from others.
© 12/20/2016 Charles A. Ford of Hunt & Associates, P.C. All rights reserved.