Special Needs Trust Fairness Provisions Become Law

Kathleen R. Rodberg

On December 13, 2016, the 21st Century Cures Act (the Cures Act) was signed into law by President Obama.  While the Cures Act addresses a myriad of issues, Section 5007 entitled “Fairness in Medicaid Supplemental Needs Trusts” is particularly important, and long overdue.

Prior to the Cures Act becoming law, certain disabled individuals under age 65 could become eligible for need-based public benefits, like Medicaid, by establishing a special needs trust which could be used for that individual’s care during life, and upon death would go to reimburse those Medicaid benefits received.  However, these trusts could only be established by certain individuals other than the beneficiary himself or herself.  A parent, grandparent, guardian, or court could establish the trust, but the disabled individual could not regardless of mental abilities.

At first blush this does not seem to pose a particularly big obstacle; however, it was particularly problematic for older disabled adults whose disabilities were only physical and did not impact cognitive abilities.  While said individual may be managing his or her own affairs and be fully capable of understanding the creation and implementation of the special needs trust, the individual had to involve a family member or court in order to actually use this planning technique.  This added costs to the planning process, particularly if a court order was required if no eligible family members were still living.

The provisions of Section 5007 of the Cures Act incorporates language from various versions of the Special Needs Trust Fairness Act, which was introduced to Congress in various iterations over the years but was never passed and signed into law.  Now, thanks to Section 5007, those suffering from physical disabilities but who are competent and managing their own affairs can now establish and fund these trusts to help provide for care needs with greater simplicity and less cost.

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