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Senate Passes Special Needs Trust Fairness Act

Senate Passes Special Needs Trust Fairness Act

  • Tax

The Special Needs Trust Fairness Act is a piece of legislation that would provide individuals with disabilities the legal right to create their own Special Needs Trust. The United States Senate unanimously approved the Act in September 2015; it now awaits vote in the House of Representatives.

Current law provides that individuals with disabilities must rely on a parent, grandparent, legal guardian, or court to create a Special Needs Trust for their benefit. The court process for disabled persons who lack relatives or guardians to establish the trust on their behalf is not simple or cheap. The Act would provide more freedom to disabled persons and prevent a potentially expensive court procedure. Learn more about the Special Needs Trust Fairness Act here.
In order to qualify for Medicaid benefits for the aged, blind, or disabled, an individual must not have more than $2,000 in assets. Special Needs Trusts provide a legal method of holding assets for the benefit of a disabled person while at the same time not infringing on their government benefit eligibility. A special needs planning attorney can review requirements for distributions, funding options, and more.
The Act would only permit individuals with disabilities to create self-settled (or first-party) trusts. There are two types of Special Needs Trusts: “third party” trusts and “self-settled” trusts. Someone other than the disabled person transfers their assets to a third party trust, whereas self-settled trusts are funded with the beneficiary’s own assets.
Progress for the Act has been slow going. Although the current text was introduced in February 2015, an earlier version was originally introduced in 2013, but never enacted. The recent news of the Act passing the Senate comes just a few weeks before Special Needs Law Month began October 1st.By Attorney Gregory Herman-Giddens
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