Special needs trusts are an important tool in an elder care attorney’s toolbox. Established correctly, SNTs allow a person to qualify for public benefits such as Medicaid or SSI while maintaining assets in a trust to supplement the funds provided by such programs. First-party SNTs are established with funds that belong to the beneficiary. By placing the assets into a first-party SNT, the beneficiary can reduce his or her resource level to below the $2,000 required by Medicaid and SSI to qualify for benefits. Unlike SNTs established with third-party funds, a first-party SNT will include a government payback provision. Often, competent adults who have a physical injury or disease will want to establish first-party SNTs, with the appropriate government lien, for themselves.
Since the Omnibus Budget Reconciliation Act of 1993, it has been a legal requirement that first-party special needs trusts be established by a parent, grandparent, guardian or court. This requirement has caused some issue for competent disabled adults who wish to establish their own trusts, and it is in direct conflict with the pooled trust. Pooled trusts, which are special needs trusts run by a non-profit third party for a pool of beneficiaries who place their own funds in the trust, were permitted by Congress in 1993 as well. Because of these issues, the Special Needs Trust Fairness Act was resubmitted to Congress in 2015 asking for a law allowing competent disabled adults to establish first-party SNTs for themselves.
Currently, the act has passed the Senate and is now under consideration by the House Committee on Energy and Commerce. As an issue of policy, it is highly likely the bill will pass a vote in the full House as well. Passing this bill will free up court time and resources and cut down on unnecessary costs for disabled adults. It will also offer us, as elder care attorneys, another option to provide clients who are receiving benefits and who inherit or are awarded a lump sum of money over $2,000. Imagine the convenience to our disabled clients of establishing their own trusts, picking their own trustees and having funds readily available for the remainder of their lifetimes to supplement their SSI benefits without the necessity of court intervention.
You can follow the progress of the bill on Congress.gov or contact your own representative to establish your support as an elder care professional by referencing H.R.670 - Special Needs Trust Fairness Act of 2015. We will keep you updated at LWP as the bill continues to move forward becoming law and providing an exciting new opportunity for our clients!
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Kimberly M. Brannon, Esq., Legal-Technical and Software Trainer