Reps. Glenn “GT” Thompson (R-PA) and Frank Pallone (D-NJ) reintroduced the Special Needs Trust Fairness Act (H.R. 670) today to allow individuals under the age of 65 with disabilities, who have the mental capacity, to create their own Special Needs Trusts. The Special Needs Trust Fairness Act is intended to correct an apparent unintended discrepancy in the federal law regarding who may establish a (d)(4)(A) Trust.
Under current law, there is a pooled Special Needs Trust [commonly referred to as a (d)(4(C) Trust] that may contain the assets of numerous disabled individuals with sub-accounts for each trust beneficiary, and an individual Special Needs Trust [commonly referred to as a (d)(4)(A) Trust] that may contain the assets of one disabled individual. Only a parent, grandparent, legal guardian of the individual, or a court can establish a 42 U.S.C. § 1396p(d)(4)(A) special needs trust. Noticeably absent from this list is the disabled individual himself. As a result, those otherwise competent under age 65 disabled individuals who do not have a living parent or grandparent, and do not require a legal guardian must petition the court causing unnecessary legal fees. However, in recent years, Social Security Administration has challenged Special Needs Trusts created by the Court when the Petition was filed by the disabled individual creating even more barriers for the use of a (d)(4)(A) Trust by these individuals. By contrast, 42 USC 1396p(d)(4)(C) provides that a pooled Special Needs Trust may be established by a parent, grandparent, legal guardian or the individual, the individual, or a court. Note, not all states or counties have Non-Profit organizations operating valid Pooled Special Needs Trusts so this is not an alternative even available to all disabled persons. There is no apparent reason why “by the individual” was left out of the provisions of (d)(4)(A) and yet included in (d)(4)(C).
The intent of a (d)(4)(A) Special Needs Trust is to allow a disabled individual who is under the age of 65 who receives means-based government benefits, such as Supplemental Security Income (SSI) and/or Medicaid health benefits, to continue to qualify for said means-based benefits while using the Special Needs Trust assets to enhance the quality of life by paying for medical and other daily living expenses, that are not covered by government benefits. For example, disabled individuals can use a d(4)(A) Special Needs Trust to hold their own assets, such as lawsuit settlement or inheritance proceeds, to prevent their loss of eligibility for necessary government benefits upon receipt of such newfound wealth. This is particularly beneficial when the newfound wealth is not sufficient to replace the living and medical expenses covered by government benefits and programs. At the disabled individuals’ death, the Special Needs Trust must payback to the state Medicaid agency the costs of medical assistance paid on behalf of that individual. Note, by contrast, there is no payback provision required in third-party special needs trust established by and funded with the assets of the disabled individual’s family members, rather than their own assets.
The Special Needs Trust Fairness Act, if passed, will save competent adult disabled individuals with no living parent or grandparent and who otherwise would not require the appointment of a legal Guardian from incurring unnecessary legal costs and time in petitioning the Courts, and preserve their Constitutional rights. This is a common sense solution whose time, I hope, has come.
If you’re further curious about the Special Needs Trust Fairness Act, or about setting up a Special Needs Trust, feel free to speak with us here at Bivens & Associates.