SPECIAL NEEDS TRUST FAIRNESS ACT BECOMES LAW

23 Dec SPECIAL NEEDS TRUST FAIRNESS ACT BECOMES LAW

On December 13, 2016, President Obama signed the 21^st Century Cures Act which contains the Special Needs Trust Fairness Act that allows disabled persons with mental capacity to create their own special needs trust. Prior to the passage of this law, a disabled person under age 65 could only establish such a trust through a parent, grandparent, court or guardian pursuant to the Omnibus Budget Reconciliation Act of 1993 – even if the disabled person had mental capacity. Originally, the law was designed to help those who relied on Medicaid for drug care costs and health benefits. The law permitted the creation of a trust to supplement, not supplant, their needs that governmental benefits failed to cover. When such a trust is established with the assets of the disabled individual, the state must be reimbursed to the extent that governmental benefits were advanced. If a third party (such as a parent) creates a special needs trust without using funds of the disabled individual, then there is no payback provision.

Prior to the passage of this new law, it was particularly unfair to disabled persons with mental capacity who had no living parent or grandparent since they would have to “spend down” their resources or go to the cost of hiring legal counsel and going to court to create the trust to obtain Medicaid eligibility. Since there is no limit to how much the trust can hold, this new law is particularly beneficial to those disabled persons with mental capacity who have more resources. For disabled individuals with very limited resources, “spend down” options such as purchasing non-countable resources or the use of an ABLE account (which presently permits annual deposits of $14,000 and is limited to a total of $100,000) might be considered to avoid more expensive legal costs.

Notwithstanding the victory for many with the passage of the Special Needs Trust Fairness Act, many are concerned about possible reductions in services and protections if Medicaid block grants become a reality.