The US House of Representatives recently passed the Special Needs Trust Fairness and Medicaid Improvement Act by a vote of 382 to 22. The bill now goes to the Senate, which earlier passed a similar bill, but was different enough that the new bill will have to win fresh passage through the Senate.
The Special Needs Trust Fairness and Medicaid Improvement Act allows disabled individuals to set up their own Special Needs Trust (SNT) without the need of a parent or legal guardian. A SNT allows for disabled individuals to retain assets and obtain income while remaining eligible for government programs, like Supplemental Security Income and Medicaid.
Currently, a SNT can only be established “by a parent, grandparent, legal guardian of the individual, or a court”. The problem the new act seeks to fix is the incorrect presumption that a disabled trust beneficiary necessarily lacks the mental capacity to establish a trust. A physical disability that qualifies someone for benefits does not mean that their mental capacity has also been diminished.
Another problem with the current system of requiring someone else to establish the trust is that not every disabled individual has a parent or grandparent to establish a SNT on their behalf. In that case, the disabled individual has to go to court to either get a legal guardian appointed to establish the trust or to have the court directly set up the trust. Going through this process can take a significant amount of unnecessary time, added paperwork, and court fees. Additionally, having a court establish a trust can be especially problematic in understaffed and/or rural court systems where public officials have little experience with SNTs.
The new act would fix these problems by allowing disabled individuals to directly establish their own trusts without having to unnecessarily burden themselves and the court system with needless delays and costs or to be dependent on a parent or legal guardian.