By: Kevin R. Albaum, Esq.
Clark, Campbell, Lancaster & Munson, P.A.
A bill known as the Special Needs Trust Fairness Act (the “Act”) has been working its way through the legislative process for a couple years now. Finally, on December 17, 2016, President Obama signed the Act into Federal Law. The law became effective immediately.
A first party special needs trust is a special type of trust created and funded with a disabled person’s assets in order to maintain eligibility for means based government benefits such as Medicaid and Supplemental Security Income (“SSI”). While a first party special needs trust has restrictions on how the money in the trust may be used, it can generally be used for the benefit of the disabled individual. The trust can be used to purchase most items for the beneficiary as long as the purchase of such items does not cause the person to lose eligibility for their government benefits by accumulating too many countable assets under Medicaid and SSI rules. However, the trust’s funds cannot be used to purchase food, pay for routine shelter costs like rent, mortgage, basic utilities, or to purchase items for someone other than the trust beneficiary.
The Act was designed to revise the prior law requiring individuals with disabilities to use a parent, grandparent, guardian, or court of competent jurisdiction to create a first party special needs trust. Under the old law, a person could be disabled and still be competent to create a trust (such as a victim of an accident or a blind individual), but this individual still would not be able to establish the trust without the assistance of a third party. Under the new Act, individuals with disabilities, who have the requisite level of capacity, can now create a first party special needs trust for themselves rather than depending on others to do so for them.
Special needs trusts exist because the federal government decided that they do not want to penalize disabled individuals by requiring them to spend down their limited assets on health care and essential living expenses before they can become eligible to receive government benefits to help pay for the disabled individual’s health care and essential living expenses. Once the trust is implemented and funded with a disabled individual’s assets, the individual can immediately apply for or become eligible to receive governmental benefits and will be able to continue to use the trust for their personal benefit during their lifetime. Preserving assets in a special needs trust allows a disabled individual an incredible opportunity to extend the use of the trust assets over their lifetime without preventing them from obtaining and receiving governmental benefits.
It’s important to consult a legal professional with experience in elder law when considering creating and funding a special needs trust to ensure governmental benefits are preserved.
Kevin Albaum is an Elder Law Attorney with the law firm Clark, Campbell, Lancaster & Munson, P.A. in Lakeland. Questions can be submitted to firstname.lastname@example.org.
Kevin moved to Lakeland, Florida to join Clark, Campbell, Lancaster, and Munson where he practices in the areas of: elder law, guardianship, estate planning, trust administration, and Medicaid. Since moving to Lakeland, he has become involved with the Alzheimer’s Association Walk Committee, EMERGE Lakeland, and VISTE.