The Special Needs Trust Fairness Act, federal legislation that would allow people with disabilities to create their own special needs trusts instead of having to rely on others, has cleared a key Senate hurdle.
On June 24, 2015, the Senate Finance Committee voted to send the bill to the full Senate, a significant step that clears the way for possible passage. The House version of the bill is still tied up in committee.
The Special Needs Trust Fairness Act fixes an especially frustrating drafting error in the Social Security Act that prevents people with disabilities from creating special needs trusts to hold their own funds. Under current law, only a parent, grandparent, guardian or court can establish a first-party special needs trust to hold the beneficiary’s assets. This forces a competent person with disabilities to incur unnecessary expenses and waste time to set up a trust that she could otherwise create on her own with the help of an attorney. In most cases, not setting up a special needs trust is not an option, since the trust is typically needed to protect a person with disabilities’ access to government benefits.
The Special Needs Trust Fairness Act fixes this error and specifically permits a person with disabilities to create her own trust. Unfortunately, the bill does not eliminate the portion of the law requiring first-party special needs trusts to contain payback clauses allowing the government to recoup Medicaid costs from trust assets after the beneficiary passes away.