Special Needs Trust Fairness Act

People with special needs have a new ability to help themselves.

On December 13, 2016, President Obama signed the Special Needs Trust Fairness Act (buried within a larger law titled the 21st Century Cures Act.)  The Special Needs Trust Fairness Act allows someone with special needs to create his/her own Special Needs Trust.  (For background on Special Needs Trust, read the April 2, 2015 installment of this blog.)

Before adoption of the SNT Fairness Act, only a parent or grandparent of the special needs person or a court could create a SNT.  As awful as it sounds, the Congress that first memorialized the concept of a Special Needs Trust must have assumed that all people with special needs lacked the ability to handle their own affairs.  Of course, that was a terribly incorrect assumption.  Unfortunately, the law that allows Special Needs Trusts wasn’t updated for years.  Finally, that oversight is fixed.

So, what does this mean?  If a person needs to create a Special Needs Trust, he/she can do it.  A parent, grandparent, or court isn’t necessary.  The person with special needs now has control that wasn’t available before.

Here’s an example.  Some people with special needs have injury claims against someone.  (Perhaps the person is the victim of medical malpractice or an industrial accident.  Perhaps the injury is even the cause of the person’s disability.)  The injury claim can take a long time to pursue through the court system.  During the interim, the person may have started to receive Supplemental Security Income for food and housing and Medicaid for medical care.  When the court award or settlement payment arrives, it can cause a break in Medicaid coverage (because the new money is “income” during the month it arrives) and long term suspension of SSI payments (because the person will have more “savings” that SSI allows.)

To avoid the loss of these benefits, the person with special needs often places the judgment/settlement award into a Special Needs Trust.  Rarely was there a Special Needs Trust waiting for use.  The person usually needs a Special Needs Trust set up about the time that the award is going to arrive.  Before the SNT Fairness Act, the person needed a parent, grandparent, or court order to create the SNT.  Now, he/she can set up the SNT directly.

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