With the passing of the Special Needs Trust Fairness (SNTF) Act, individuals with a disability under the age of 65 may establish a first party special needs trust on their own behalf. Prior to the SNTF Act, special needs trusts could only be established by a parent, grandparent, legal guardian, or court.

Special Needs Trusts

Special needs trusts are established for the benefit of individuals with a disability to supplement the financial assistance they receive from government programs, namely Medicaid. Special needs trusts are valuable tools for maintaining Medicaid and Supplemental Security Income (SSI) eligibility, as funds held in a special needs trust are not considered when determining an individual’s eligibility for financial assistance under such programs.

Eligibility

To establish a SNT on their own behalf, the individual must be capable of making financial decisions and be under the age of 65. If eligible, individuals with disabilities enjoy increased autonomy and self-direction under the SNTF Act, especially in cases where living relatives or guardians are unable or unwilling to establish a trust on the individual’s behalf.

Medicaid Payback Provision

There are two general categories of special needs trusts: first party trusts and third party trusts. A first party special needs trust is funded with assets owned by the individual with a disability, oftentimes by funds received through a personal injury settlement or inheritance. A third party trust is established on behalf of an individual with a disability, but funded by a third party, such as a parent or legal guardian. Under the SNTF Act, only first party special needs trusts must include a Medicaid payback provision. A Medicaid payback provision grants the state the right to recover an amount equal to the benefits received during the individual’s lifetime from any funds remaining in the trust upon the individual’s death.