People with Disabilities Now Able to Create Their Own Special Needs Trusts

The Special Needs Trust Fairness Act, federal legislation that will allow people with disabilities to create their own special needs trusts instead of having to rely on others, has been signed into law by President Obama.  The measure was included in the 21st Century Cures Act, a $6.3 billion package of health-related initiatives that has also been signed into law by the President Obama.  The new Cures Act will hasten how drugs and medical devices are reviewed and authorized by the Food and Drug Administration. It also includes funding for the prevention and treatment of opioid addiction and changes to the way mental health services are delivered. Importantly, the bill also allocates over $1 billion to fund Alzheimer’s research to find a cause and a cure, and methods of prevention.

The prior law governing first-party special needs trusts stated that a trust must be created by the beneficiary’s parent, grandparent, or guardian or by a court, even if the beneficiary is mentally competent.  This requirement forced beneficiaries who need to fund a first-party special needs trust to rely on family members for assistance, or, if they don’t have living or capable parents or grandparents, to spend thousands of dollars petitioning courts to establish a special needs trust. In most cases, not setting up a special needs trust is not an option, since the trust is typically needed to protect a person with disabilities’ access to government benefits.

The Special Needs Trust Fairness Act inserts language into the Social Security Act to give individuals with special needs the same right to create a trust as a parent, grandparent, guardian, or court.  If competent to do so, disabled people can now create a trust on their own behalf using their own assets.  The two-sentence bill makes no other changes to the Social Security Administration’s treatment of trusts and it does not alter the requirement that first-party trusts contain payback provisions allowing state Medicaid offices to recoup costs from a trust after the beneficiary’s death.

The bottom line is: as of right now, individuals themselves who are legally competent but disabled can create their own first-party special needs trusts. 

A special needs trust should still be set up only with the help of a qualified attorney.  To learn how a special needs trust might benefit you or a loved one, contact your special needs planner.

(Adapted from an article on the Academy of Special Needs Planners website. Mr. Vanarelli is a founding member of the Academy of Special Needs Planners.)

For additional information concerning special needs trusts and disability planning, visit: