Two words were all that were missing from the Special Needs Trust Fairness Act of 2015, but they were enough to create a legal challenge for disabled individuals. When President Obama signed the 21st Century Cures Act in mid-December, the addition of the two words—“the individual—changed the existing statute and gave disabled individuals an important power.
In “Special Needs Trust Fairness Act Becomes Law,” wealthmanagement.com says that more than 20 years of unfair treatment to individuals with disabilities now has ended by permitting those with the capacity to create their own self-settled special needs trust (SNT) to do so without requiring them to go to court. Before this new law was enacted, individuals with disabilities who didn’t have a living parent or grandparent couldn’t create their own self-settled SNT without a court hearing.
You should still speak with an experienced special needs planning attorney about drafting an appropriate self-settled SNT. The 21st Century Cures Act allows capable individuals with disabilities, to independently make their own decisions. They’re not forced to go to court to establish a SNT, in the absence of living parents or grandparents.
The 21st Century Cures Act finally amends Section 1917(d)(4)(A) of the Social Security Act (42 U.S.C. 1396p(d)(4)(A)) by inserting “the individual,” after “for the benefit of such individual by.” This new law is effective for trusts established on or after December 13, 2016. However, some states may want to try to hold off and pass their own state statutes.
One reminder: self-settled special needs trusts shouldn’t be confused with third-party special needs trusts. Those trusts are funded with assets from family members or other sources, rather than with the individual with disability’s own assets. Third party SNTs are a common estate-planning tool used to improve the quality of life of the individual with disabilities.
The assets held by third-party SNTs are not required to be used to repay the Medicaid program for the cost of care provided to the individual with disabilities. Rather, the assets in a third-part special needs trust can pass to other family members on the death of the individual with disabilities.
To ensure that any SNT works well as part of an overall estate plan, meet with an estate planning attorney who is familiar with SNTs.
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Reference: wealthmanagement.com (December 16, 2016) “Special Needs Trust Fairness Act Becomes Law”