In December, 2016, Congress passed and President Obama signed the Special Needs Fairness Act.
Why is this such a big deal?
Anyone who has special needs or who knows someone with special needs will understand how important it is for that recipient to keep his or her government benefits. Special needs individuals are usually totally dependent on such benefits for their everyday living and medical expenses. And most people realize that if a special needs person becomes the beneficiary of funds from an inheritance or a gift, that special needs person will lose the government benefits for some period of time. Until recently, the only way to safely transfer large sums to a special needs recipient was to do so through a so-called “d (4) (a) special needs trust.”
It was all well and good that such trusts could be created to protect the special needs recipient from losing benefits. But under the “d (4) (a)” trust rules established by the federal government, such a trust could only be established by a limited group of Trustors – parents, grandparents, or the court. Even if the recipient was fully competent mentally, he was dependent on others to undertake the necessary steps to establish a special needs trust. More often than not, the recipient’s grandparents were deceased, and the parents often never got around to actually setting up a trust before they died. Thus, the special needs person was forced into an expensive and time consuming court process to obtain authorization to establish a trust to hold his own inherited or gifted funds.
Now, thanks to the concerted advocacy of the National Academy of Elder Law Attorneys* and others, the law has been changed. It is now possible for a mentally competent special needs person to establish his or her own “d (4) (a)” trust. Along with another recent law (the so-called Able Act) that allows special needs persons to set aside $14,000 annually for themselves without losing government benefits, this new provision of the federal rules gives a disabled adult the dignity and capability of better managing his or her own affairs.
Let’s see how this actually works. Mary, a single child, is a recipient of Supplemental Security Income as the result of a degenerative disease that has left her confined to a wheelchair and unable to work. She is completely competent mentally, but has significant issues with mobility. Mary no longer has grandparents. Her father died some years ago and her mother recently passed away without doing any estate planning. Therefore Mary inherited her mother’s entire estate, outright. As noted above, Mary’s owning of a significant estate would otherwise disqualify her from continuing to receive her SSI and Medicaid benefits. But under the new Special Needs Fairness Act, Mary can now have an estate planning attorney prepare a Special Needs Trust for her to execute herself, into which she can transfer estate assets that can be used for her benefit without cutting short her SSI and Medicaid benefits.
If you know someone like Mary who could benefit from this important legislation, please tell him or her to contact our office and we would be honored to help in establishing a Special Needs Trust.
*Lantz Law, Inc. is a proud member of this organization.