Download Special Needs Trust Fairness Act

Special Needs Trust Fairness Act
(H.R. 670/S. 349)
The Special Needs Trust Fairness Act corrects an error in the law by allowing individuals with disabilities, who have
the mental capacity, to create their own special needs trusts. Under the current law, only a parent, grandparent, legal
guardian of the individual, or a court can establish a special needs trust. Yet, other arrangements like the ABLE Act
and pooled trusts give individuals the freedom to create their own accounts.
What is a special needs trust?
Individuals with disabilities are often enrolled in government programs that help cover the costs of their long-term
care. In order to qualify for Medicaid coverage, these individuals must often spend down their assets, in some cases
to as little as $2,000. Federal law allows individuals with disabilities to utilize special needs trusts to retain some of
their assets for the purpose of helping with certain costs of living not covered by programs, such as Medicaid.
For example, assume that Jane Doe has a disability. She qualifies to receive Supplemental Security Income (SSI)
and Medicaid. In order to retain some of her assets to cover additional therapy and nursing care not covered by
Medicaid, Jane’s parents set up a special needs trust for her.
What is the problem with special needs trusts that needs to be fixed?
Federal law does not allow individuals with disabilities to set up their own special needs trusts. These trusts can only
be established by a parent, grandparent, legal guardian of the individual, or a court. Individuals must petition the
court in order to establish these special needs trusts on their own.
In the example above, assume Jane Doe does not have parents or grandparents or they are not willing to set up a
special needs trust on her behalf. If she wants to set up her own special needs trust, she is not able to do so and
must petition the court.
Individuals with disabilities that are capable of setting up their own special needs trusts should have the freedom to
establish these trusts without having to petition the court or undergo unnecessary legal costs.
How does the Special Needs Trust Fairness Act solve the problem?
The Special Needs Trust Fairness Act corrects what is believed to be a technical or legislative drafting error in the
Omnibus Budget Reconciliation Act of 1993 (OBRA-93). The law did not include “an individual” in the list of persons
allowed to create a special needs trust. This omission has created a presumption that an individual with a disability
lacks the requisite mental capacity to create his or her own trust. However, individuals are permitted to set up other
arrangements under the ABLE Act and can create pooled trusts, which were established at the same time as special
needs trusts in OBRA-93.
The Special Needs Trust Fairness Act would solve this inequity by making a simple change to the Social Security Act
that would allow individuals to set up their own special needs trusts. This solution passed out of the Senate Finance
Committee in the 113th Congress with bipartisan support. In the 114th Congress, it is sponsored by Representatives
GT Thompson (R-PA) and Frank Pallone (D-NJ) and Senators Chuck Grassley (R-IA) and Bill Nelson (D-FL).
Can States recoup money from special needs trusts?
The trusts affected by the Special Needs Trust Fairness Act are required to include a Medicaid payback provision.
This means that upon an individual’s death States have the right to receive remaining trust funds up to an amount
equal to the total medical assistance paid by the State for an individual. This allows individuals with disabilities to
use trust funds for additional care during their lifetimes but ensures that the States are first in line for repayment upon
an individual’s death.