On Tuesday, December 13, 2016, President Obama effectively amended the federal statute allowing for the establishment of self-settled special needs trusts for disabled individuals (otherwise known as 402 U.S.C. Section 1396p(d)(4) (a)).
The federal statute was changed by inserting the words “the individual”. This small, yet powerful change now effectively enables competent, disabled Americans who are under 65 to independently establish and fund their own special needs trusts. Now they will be able to protect their assets from Medicaid and SSI consideration without the need for a parent, grandparent, legal guardian or a court to establish the trust on their behalf.
Most of us are aware of Medicaid but less familiar with the Supplemental Security Income (SSI) program which pays benefits to disabled adults and children who have limited income and resources. SSI benefits also are payable to people 65 and older without disabilities who meet the financial limits.
Prior to this legislation, the statute required a proxy to establish this particular trust, regardless of an individual’s capacity. Such requirement often led to significant delays and costly court intervention merely to establish a self-settled special needs trust for individuals. This impediment for many competent individuals is now removed.
The statutory language indicates that the change to federal law is in effect immediately upon enactment so any disabled individuals who are capable of setting up such a trust should have access to this option. Be aware, however – with regard to federal benefits funneled through your state law – you may want to verify your state law has adopted these changes too. E.g. the New York State Department of Health has not yet amended its own regulatory language to conform with the federal changes as of yet. It is anticipated that this change will be accomplished in January 2017 and will likely be retroactive to the date of the federal statute.
For now, the big player in this, the Social Security Administration, has already issued an emergency message on December 13 acknowledging this statutory amendment.
Brad’s Tip: You want an example of what this means? Let’s assume you are competent and under 65. You want to be able to keep your assets, only using those you require for special needs, and still want to take advantage of Medicaid or SSI assistance in the future (think federally paid nursing home), now it is easier for you to put those assets away from the clutches of the federal government – as opposed to spending down to poverty before you qualify for that governmental assistance.
If you are struggling in your job due to a disability, contact our firm to learn more about Federal Disability Retirement.