special needs trustThe U.S. House Energy and Commerce Committee approved the Special Needs Fairness Act on July 13, 2016, as part of a package to improve Medicaid. The House bill had 26 co-sponsors including local Representative Pete Sessions. This legislation, which has already passed the Senate Committee, allows disabled individuals to set up their own special needs trusts. Now that the bill has been passed in some form by both the House and Senate Committees, the House and Senate will now need to agree on the package for this proposal to become law. Until this time (from 1993 when special needs trusts were permitted as an exception to the transfer penalty rules), disabled individuals who have assets (that would otherwise disqualify them for Medicaid) could not establish their own special needs trusts unless it was done by a court order, guardian, parent, or grandparent. However, the present law is unfair to those who have mental capacity but who happen to be disabled. If a person has mental capacity, then they should have the same right to establish any type trust as anyone else who has mental capacity.

Initially Congress (by the law passed in 1993) apparently hoped to increase the quality of lives of those who are disabled by allowing disabled individuals under age 65 (through a parent, grandparent, court, or guardian) establish a trust with the disabled person’s own assets (which would otherwise disqualify them for Medicaid) to be used for items or services not covered by Medicaid (normally when a person receives Supplemental Security Income, the person is automatically entitled to Medicaid). The monthly Supplemental Security Income payment represents income for food and shelter. The trust is not subject to a “lookback period” as it is not a disqualifying transfer and the assets held in the trust are not countable if properly drafted, but the special needs trust must have a “payback” provision to the state to the extent Medicaid benefits have been advanced. If a special needs trust is established with the funds of someone else (who can be over 65 and not disabled), then the state does not need to be named as a remainder beneficiary.

The passage of this bill continues the recent trend of disabled citizens recognizing the rights of those who are disabled.

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