Individuals with Disabilities can Establish Their Own Trust

As of December 13, 2016, persons who are mentally capable will now be able to establish their own self-settled special needs trust (SNTs). Incredibly, this type of trust could be established before this date by a parent, grandparent, a guardian (tutor, in Louisiana) or a court. December 13 was the day President Obama signed the 21st Century Cures Act (P.L. 114-255). Section 5007 of this law contains the “Fairness in Medicaid Supplement Needs Trusts,” which adds two words (“the individual”) to the laws governing SNTs.

This small change corrects an error made more than 23 years ago in the Omnibus Budget Reconciliation Act of 1993. That law codified the ability for persons with special needs to have a trust that would supplement the public benefits they were otherwise receiving. Without an SNT, persons with disabilities risked losing public benefits if they had an inheritance, a personal injury award or receive other funds. Due to an unfortunate omission, however, the law did not permit individuals to establish their own SNTs. Some think it was an oversight as the law was quickly assembled near the end of the Congressional term, as another mechanism in the same section of the law- apooled SNT-did allow individuals to self-fund. Unfortunately, government agencies have strictly enforce the omission. Consequently, a person with disabilities who did not have a living parent or grandparent was forced to spend time and money to go to court and have a judge approve the trust (directly or through a guardianship/tutorship proceeding). Aside from the time and expense, it was degrading for an otherwise capable person to depend on others for this task – contrary to the goal of maximizing a person’s independence whenever possible.

Now, a person with the ability to make financial decisions can establish his or her own SNT. The Social Security Administration recently announced emergency provisions for its caseworkers to permit individuals to establish their own self-settled trust.

The Fairness Act is the second law in as many years liberalizing the use of the funds on behalf of the people with disabilities. Last Year, Congress enacted the ABLE law that allows persons with disabilities to have accounts that are shelter from being counted as a resource for public benefits. ABLE, however, has three significant limitations: only a person whose disability occurred prior to age 26 can qualify; only $100,000 is protected against SSI eligibility; and only $14,000 can be added to the account each year. A self-settled SNT does not contain any of these restrictions. Furthermore, although the Louisiana Legislature has authority the use of ABLE Accounts, Louisiana does not yet have its program in place.

Carole Cukell Neff

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