Special Needs Trust Fairness Act House Update

When we last checked in with The Special Needs Trust Fairness Act the Senate passed it. That was in September of 2015.

We have been waiting on the House of Representatives ever since.

Well good news, the House finally go the Bill out of committee. This means it is one step closer to getting a vote.

Disabled individuals will finally be able to create their own Special Needs Trust for their own assets if the House does finally pass it sometime this year and it becomes law.

Who It Doesn’t Help

There are two other situations which the Act will not have an impact on.

The first situation deals with mental disabilities. If the person does not have the mental capacity to sign documents like trust agreements then this law won’t help. People in that category will need to make other arrangements.

The second situation is when a parent or grandparent (or anyone) wants to leave a legacy to a disabled individual without getting stuck with a payback provision. People in this category will need to use a third party Special Needs Trust in order to avoid the payback provision that goes along with the type of Special Needs Trust created with assets a disabled person already owns.

So stay tuned to see if and when the government finally completes this huge change in the law.

Special Needs Trust Fairness Act Passes Senate Committee

The Special Needs Trust Fairness Act is one law many people have been waiting a long time for. Thankfully, it became one step closer to becoming a reality when it made it out of the Senate Finance Committee last week.

The Special Needs Trust Fairness Act seeks to fix a critical oversight in the law currently governing Special Needs Trust. That oversight is that a disabled person can only take advantage of a Special Needs Trust that is established by certain people. They cannot create their own Texas Special Needs Trust.

If it becomes law, the Special Needs Trust Fairness Act will allow disabled individuals to take advantage of a Texas Special Needs Trust for themselves so they can set aside their own assets for expenses and items that government benefits does not pay for.

What do you think about the Special Needs Trust Fairness Act? We would love to hear from you in the comments section below.

Here is the text of the Special Needs Trust Fairness Act:

SECTION 1. SHORT TITLE.

This Act may be cited as the “Special Needs Trust Fairness Act of 2015”.

SEC. 2. FAIRNESS IN MEDICAID SUPPLEMENTAL NEEDS TRUSTS.

(a) In General.—Section 1917(d)(4)(A) of the Social Security Act (42 U.S.C. 1396p(d)(4)(A)) is amended by inserting “the individual,” after “for the benefit of such individual by”.

(b) Effective Date.—The amendment made by subsection (a) shall apply to trusts established on or after the date of the enactment of this Act.

Early Termination Provision Ruins a Special Needs Trust

When it comes to eligibility for government benefits like Medicaid your Texas Special Needs Trust must meet all of the legal requirements. If your Special Needs Trust does not meet all of the legal requirements, then the funds that you were trying to protect with a Special Needs Trust might end up being unprotected and having to be spent before qualifying for Medicaid or other benefits. It does not take much either, one simple mistake can torpedo an entire trust.

In one recent case a disabled adult was in injured by a hospital and received a settlement from his personal injury case. In order to continue to receive his SSI benefits a portion of the personal injury proceeds were placed into a Special Needs Trust. So far so good, right?

Well, unfortunately his Special Needs Trust included provisions for early termination of the trust. While the rest of the trust did not create a problem, the way the early termination provisions were setup it ended up violating one of the statutory requirements for a valid Special Needs Trust. So at the end of his case, the money he tried to protect to enhance his lifestyle ended up being counted as an asset that he had to spend before he could receive his SSI benefits.

Do not make the same mistake with your Texas Special Needs Trust. Remember, just because a document is called a “Special Needs Trust” does not mean it automatically works the way it should and that it meets the legal requirements. You need to review the document, know the key requirements, and make sure what your Special Needs Trust attorney gives you is actually a proper Special Needs Trust.

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