New Law Establishes More Flexibility in Creating a Special Needs Trust

In 2016, the 21st Century Cures Act was signed into law. This sweeping piece of legislation was drafted to help address a myriad of issues in medical research, the advancement of experimental medications, and mental health protocols.

The law provides $4.8 billion in additional funding for the National Institutes of Health, along with $500 million in new funding for the Food and Drug Administration and $1 billion in grants to help states deal with opioid abuse, according to the Washington Post.

One provision in the new law that is not getting as much publicity, but makes a big impact in the field of estate and special needs planning is § 5007. This Section is called the “Fairness in Medicaid Supplemental Needs Trusts” and it amends 42 U.S.C. § 1396p d(4)(a) to add the words “the individual” to the list of persons who are legally authorized to establish a self-settled special needs trust (SNT) for someone with a disability.

Why § 5007 Is a Big Deal

Autonomy and efficiency. These are the main reasons why § 5007 is a big deal. Previously, under 42 U.S.C. § 1396p d(4)(a), only the following individuals were allowed to establish a self-settled special needs trust:

  • Parent
  • Grandparent
  • Legal Guardian or
  • Court.

This leads to an important question – what if a disabled individual has no living parents or grandparents to establish the trust for them? Hence, the problem with § 1396b d(4)(a). This would force a disabled individual to navigate the legal system and petition a Court to approve their self-settled special needs trust.

Obviously, such an endeavor was both time-consuming and expensive often requiring the disabled individual to retain an attorney to assist with the court filings. With the enactment of the 21st Century Cures Act, this is no longer an issue.

Why a Self-Settled Special Needs Trust is Important

In recent years, the self-settled special needs trust has become an important estate planning tool allow disabled individuals to receive certain government benefits while still being able to utilize their own assets to supplement their living expenses.  When the disabled dies, or the trust is terminated, the benefits received during the lifetime of the individual would be repaid from the assets of the trust.

Taking Charge of Your Own Self-Settled Special Needs Trust

With § 5007 now the law of the law, a disabled individual with the requisite mental capacity has the ability establish their own self-settled special needs trust without the need for Court approval and without having to get approval from a parent, grandparent, or guardian.

But keep in mind, the disabled individual must be under the age of 65 when creating the trust and the trust must still include a payback provision for government assistance to be legally valid.

Self-Settled Special Needs Trust Different from a Third Party Special Needs Trust

It is important to understand that there are an array of special needs trusts that can be set up for the benefit of a disabled individual. For example, there is a third party special needs trust, which can be established and fully funded by a third party, but exists solely for the benefit of a disabled individual. A key distinction is that this type of special needs trust does not require a payback provision and is not affected by the 21st Century Cures Act.

Speak to an Experienced St. Charles Trust and Estate Planning Attorney Today

As you can see, special needs trusts are a great tool for the estate planning of a disabled individual or someone with a disabled beneficiary.  But it is extremely important to follow the necessary formalities and regulations when establishing this type of trust. That is why it makes sense to sit down with an experienced trust and estate planning lawyer in St. Charles who understands the nuances of trust formation.

Polaris Law Group takes pride in offering an effective, full-service experience to our clients. If you want to ensure that you and your family are properly cared for, contact Polaris Law Group’s experienced trust and estate attorneys, Scott Stork and Raymond Chandler today. Schedule a meeting by phone or by filling out a quick contact form today.

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