Florida Elder Law & Estate Planning Blog

Special Needs Fairness Act: Competent Person Can Set Up Self-Settled Trust

The Fairness in Medicaid Special Needs Trusts Act was signed into law by President Obama on December 13, 2016.

Until passage of the legislation, disabled adults who wished to set up a special need trust for their own benefit had to have a parent, grandparent or guardian establish the trust – even if the special needs person was mentally competent. Beyond being insulting, the requirement was problematic if parents or grandparents were no longer alive, not available, or for any reason unwilling to cooperate. In that situation, the individual had only one alternative: spend the time and money to petition the court to set up the trust.

The new law removes this barrier, permitting mentally competent individuals to set up their own special needs (self-settled) trusts. Properly designed and funded, this type of trust can preserve an individual’s eligibility for Medicaid benefits and other needs-based benefits by holding an individual’s assets in excess of the asset cap. Funds in the trust may be used only for certain expenses Medicaid will not cover, such as special therapies, equipment, etc.

In addition to being funded with the beneficiary’s own money, a self-settled trust differs from a third-party special needs trust because the residue in the trust is subject to Medicaid recovery upon the death of the beneficiary.

Feel free to call our office at (561) 625-1100 if you wish to discuss setting up a special needs trust for yourself or a loved one.