The Special Needs Trust Fairness Act, recently introduced in the U.S. House and Senate, would permit competent individuals with disabilities to establish their own self-settled special needs trusts. The proposed law should be quickly enacted.

Congress legally recognized the use of self-settled Supplemental Needs Trusts (sometimes called Special Needs Trusts) (“SNTs”) in 1993. SNTs allow assets owned by a disabled person to be transferred to and held in a trust for that individual. The assets in SNTs are not considered countable assets for purposes of determining eligibility for Medicaid, Supplemental Security Income (“SSI”), housing and other benefits provided by the NJ’s Division of Developmental Disabilities and other government benefits based upon financial need. Therefore, SNTs protect the disabled against risk of complete impoverishment. SNTs can be used to supplement daily living expenses and care when government benefits alone are insufficient.

Unfortunately, individuals with disabilities are treated differently than others under the law when creating SNTs. SNTs may be established only by a parent, grandparent, legal guardian of the individual, or a court. The individual cannot create his or her own SNT even if he or she is mentally competent. Thus, current law improperly assumes a person with disabilities lacks the requisite mental capacity to create a SNT. An individual with disabilities who has the requisite mental capacity is not legally allowed to create his or her own SNT.

There is no obvious reason why the disabled person him/herself was omitted from the class of persons who are authorized to create SNTs under the law. The omission might be nothing more than a legislative drafting error. Whatever the reason, the omission has created the often erroneous presumption that a disabled individual lacks the requisite mental capacity to create his or her own SNT. Further, not all disabled individuals are lucky enough to have a living parent or grandparent willing to create a SNT for them. Also, having to petition the court results in unnecessary legal costs for the individual with disabilities and the loss of a significant amount of time spent in petitioning the court.  In some cases, if a disabled person does not have the funds to hire a lawyer, then that person loses his or her access to necessary government benefits. This inequity in the law also affects disabled veterans and their families.

The Special Needs Trust Fairness Act would remove the misplaced presumption that individuals with disabilities lack mental capacity. In addition, since an individual with disabilities who has the requisite mental capacity can create other types of trusts, often without legal assistance, allowing an individual with disabilities who has the requisite mental capacity to create his or her own SNT will put SNTs on equal footing with other types of trusts. Moreover, the proposed law would be cost-neutral. Whoever is permitted to create the SNT, all SNTs under the law must have a “payback” provision which provides that, upon the disabled individual’s death, any funds remaining in the SNT after the individual’s death must first be used to pay back the state for any Medicaid benefits received during the individual ’s lifetime. Thus, the Special Needs Trust Fairness Act would impose a simple fix which will not be costly, but will save disabled individuals, including veterans, thousands of dollars that can be spent on necessary items and care for these individuals to survive and have the best chance for a quality life.

Readers are encouraged to contact their congresspeople and tell them you support the bill.

The Special Needs Trust Fairness Act is attached here – Special Needs Trust Fairness Act of 2013


Update on status of the Special Needs Trust Fairness Act (“SNTFA” or the “Act”): The SNTFA was filed as an amendment (#35) to the Senate Finance Committee Sustainable Growth Rate (“SGR”) legislation by Senators Nelson, Grassley, Rockefeller, and Enzi. Subsequently, the Committee leadership included the SNTFA in the Committee bill. The bill was then passed by the Finance Committee today, December 12.

A similar SGR bill was passed by the House Ways and Means Committee on December 12, but it did not include the Senate amendments. Neither the House nor the Senate bills have determined how to pay for the cost of modifying the SGR system. Members of the House Ways and Means Committee and the Energy and Commerce Committee and the Senate Finance Committee will work on the differences between bills and the funding issue over the next several months. It is likely that the final budget agreement to be passed this week will include a temporary (3-month) patch to prevent the scheduled SGR cuts. Thereafter, supporters of the Act will work to ensure the language is included as part of the conference negotiation.