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Establishing First Party Special Needs Trust is now Easier

January 10, 2019

On December 7, 2016, the U.S. Senate passed the Special Needs Trust Fairness Act. This Act makes it possible for a disabled adult who is mentally competent to establish his or her own special needs trust if they acquire assets that will put them over the asset limit for programs such as Medicaid or SSI. It corrects the false presumption in prior law that all disabled persons lack the mental capacity to handle their own legal and financial affairs.


Under prior law, only a parent, grandparent, court appointed guardian or a court itself could establish the type of special needs trust that allows a disabled individual to benefit from their assets for their supplemental needs while maintaining eligibility for Medicaid and SSI (also known as a (d)(4)(A) trust, after the enabling legislation). The Social Security Administration would sometimes even deny trusts established by a court if the disabled individual was the one who petitioned the court for an order to establish with the trust, with the outrageous position that the court was acting as the mere agent for the disabled individual. The new legislation will halt that practice.


Not all caseworkers with the Social Security Administration are aware of the new legislation and a problem we have seen is caseworkers issuing eligibility denials after evaluating trusts drawn up under the new law under the standards of prior law. This problem can be reversed by an appeal.


An individual who is not mentally competent will still need a court or other authorized party to establish a trust for them. However, by doing away with the need for a court order for competent adults, the new legislation may save a competent adult disabled beneficiary thousands of dollars in legal fees and lost benefits, as well as the time and indignity of having to involve the court in his or her financial affairs. If you would like further information on special needs trusts and how to establish them, please contact us at (231) 773-1169

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