Special Needs Trusts (“SNTs”) are a common estate planning tool used to improve the quality of life of individuals with special needs. When properly drafted they integrate with governmental benefits ensuring assets are used to supplement (rather than disqualify an individual for) governmental benefits.
On December 13, 2016, President Obama signed the 21st Century Cures Act. §5007 of the Act entitled “Fairness in Medicaid Supplemental Needs Trusts” incorporates the language from the Special Needs Trust Fairness Act of 2015 by adding two words (“the individual”) to an existing statute.
In adding the language individuals with special needs may now create their own self-settled special needs trust without having to obtain court approval. Prior to enactment of this legislation a special needs individual could not establish or fund a SNT with his or her assets – instead having to rely upon a parent, grandparent, guardian or the courts to establish a SNT. Advocates of the special needs community argued this discriminated against special needs individuals who had the capacity to independently establish a SNT.
Self-settled SNTs should not be confused with third-party SNTs. The former is established using the assets of the special needs individual – the latter is funded using the assets of a parent, grandparent, other family member or guardian.
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