The Special Needs Trust Fairness Act is part of a new set of laws produced by Congress. This new Act provides adults with special needs the opportunity to establish a Special Needs Trust autonomously. In the past, those who wanted to establish one for themselves needed to go through a parent or grandparent. If they were unable to create it, one would have to appeal to the local courts to have a friend or family member create it for them.
What is a Special Needs Trust?
This type of trust is for a disabled or mentally ill person who may lack the capacity to manage their own finances fully. The trust is put in place to assist the person with long-term care costs and coverage. In order for medicaid to cover a person with special needs, they often have to lower their assets, and the trust helps provide a secure way of spending down. A special needs trust allows for the management of funds, while avoiding disqualification for government benefits.
Why the Law Needed to Change
If a person with special needs has the ability to set up the trust on their own, they should have the ability to do so. The Special Needs Trust is there to provide an avenue for a disabled person to be self sustaining while preparing for the future. Without this change disabled or mentally ill person might have to deal with tiresome court proceedings, costing them time and money.
The initial issue is that the right of the individual to establish their own trust was left out of the 1993 Omnibus Budget Reconciliation Act, which did not mention “the individual” as one who can establish a SNT. Many in the law field believe that this may have been a clerical or legislative error in the first place. This change, made in the Special Needs Trust Act 2018 received bipartisan support.
The Trust after Death
The Special Needs Trust Fairness Act also affects the way the unused trust fund will be dispersed after the death of the individual. Trusts affected by the new act will include a Medicaid payback clause that would return funds to the state up to the amount received via Medicaid during their lifetime. This provides the state an avenue to refill funds used for newer Medicaid recipients.
For more than 40 years, our firm has been assisting people like you with long term care and estate planning needs. We bring you the knowledge and resources to protect you and your family. Armstrong & Lamberti, PLLC do not provide tax, legal, or accounting advice by articles. This material has been prepared for informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Call 718.477.7700 or contact us online to schedule a free initial consultation with an estate planning attorney at Armstrong & Lamberti, PLLC. We proudly serve Staten Island, Brooklyn and the other boroughs of New York City.