Legislation to enable individuals with disabilities to create their own special needs trusts (SNTs) has recently been reintroduced in Congress with bi-partisan support. Representatives Glenn Thompson (PA-05) and Frank Pallone, Jr., and Senators Chuck Grassley (R-IA) and Bill Nelson (D-FL) have introduced the Special Needs Trust Fairness Act of 2015 (H.R. 670/S. 349), seeking to correct a drafting error in an earlier law (Omnibus Budget Reconciliation Act of 1993), which has prevented competent individuals from establishing their own SNTs.
SNTs enable assets to be saved on behalf of people with disabilities, while protecting their eligibility for means-tested benefits. Programs such as Medicaid and SSI (Supplemental Security Income) require that applicants have no more than $2,000 in assets. SNTs can be used as a way of setting aside funds which can then be used for the many expenses not covered by public benefits.
Federal law currently requires that first party SNTs, created with assets owned by the beneficiary, be established on their behalf by a parent, grandparent, guardian or court. A first party SNT cannot be established by the beneficiary him or herself. This is inconsistent with the requirements for pooled first party SNTs, which are administered by nonprofit organizations and were also created by Congress in 1993. Individuals with disabilities have always been able to establish pooled trust accounts for themselves. More recently passed ABLE legislation similarly allows individuals with disabilities to create their own accounts. There is simply no logical reason for the conflicting requirements.
Given the increasing focus on empowering individuals with special needs and a growing self-advocacy movement, retaining legislation that presumes that all individuals with disabilities lack the mental capacity to manage their affairs is both insulting and uninformed. Consider, for instance, the large number of injured veterans, who have physical injuries but are mentally capable, who could benefit from this minor change in the law.
There would be little cost to either the federal government or the states if this legislation were passed, because upon the beneficiary’s death, funds remaining in a first party SNT must first be used to reimburse Medicaid for services provided. On the other hand, individuals who must rely upon a court to establish trusts on their behalf end up paying about twice what it would cost if they were able to establish them on their own.
The Special Needs Alliance has joined numerous other advocacy organizations– the National Academy of Elder Law Attorneys, National Multiple Sclerosis Society, Easter Seals and others–in supporting this legislation, which the Senate Finance Committee approved during the last session of Congress. This is a law that is long overdue.