On December 13, 2016, approximately two weeks prior to the start of the new year, the Special Needs Trust Fairness (SNTF) Act became law. The SNTF Act corrected what appears to have been a long-standing error in the law regarding who is authorized, pursuant to the Social Security Act, to create first-party special needs trusts (commonly referred to as a (d) (4) (A) trust). For many disabled persons, the ability to create a first-party special needs trusts is extremely important and critical to his/her continued access to important government benefits. As such, the passage of the SNTF Act is a significant victory for competent disabled adults, who now have the same right that parents, grandparents, guardians, and courts have to create a first-party trust, for their own benefit with their own assets.
Prior to December 13, 2016, and for more than two decades, such individuals were prohibited from creating their own first-party special needs ((d)(4)(A)) trust. Rather, the prior law stated that such trusts could only be created by the individual’s parent, grandparent, or guardian or by a court, even in a circumstance in which the individual was legally competent and able to handle his or her own affairs. This error in the law left legally competent disabled adults in the unfortunate circumstance of having to either rely on the assistance of a qualified family member, or to expend significant funds petitioning a court to establish a first-party trust, when a qualified family member was either no longer alive, unwilling, or unable to assist.
Specifically, the SNTF Act, which was included in the 21st Century Cures Act, accomplished this change by amending the Social Security Act to add “the individual” as a person who is now allowed to create a first-party specials needs trust for the individual’s own benefit. It should be noted that the SNTF Act did NOT make any other changes to the law regarding first-party special needs trusts, which still requires the inclusion of a payback provision to allow state Medicaid offices to recover expenditures made by the state for the individual’s benefit from the any remaining trust assets, after the individual’s death.
Quite simply: The bottom line is that the addition of just two words (“the individual’) to the Social Security Act has made a world of difference for many legally competent adults.
Planning for special needs is complex. As such, persons wishing to learn more about special needs planning for yourself or a loved one, are strongly encouraged to seek specific legal advice from an attorney, whose practice includes special needs planning.
The Elder Law Center, P.C. (subsidiary of Mickey, Wilson, Weiler, Renzi & Andersson, P.C., http://www.mickeywilson.com) is located in Sugar Grove, IL, Kane County, in the Chicago Western Suburbs, phone number: 630-844-0065.