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Self-Settled Supplemental Needs Trusts

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special needs trustsIn the February 2017 Bulletin for the Erie County Bar Association, Peter and Jillian Brevorka of the Brevorka Law Firm, P.C. discuss the recently signed 21st Century Cures Act, which will allow individuals to not only establish “self-settled” supplemental needs trusts with funding from their own assets.

The 21st Century Cures Act, which President Obama signed into law late last year, includes the Special Needs Trust Fairness Act in Sec. 5007, which amends the presumption in the original law that all disabled individuals lack the mental capacity to handle their own affairs, such as establishing supplemental needs trusts – also called special needs trusts.

When Congress first recognized first-person trusts (sometimes referred to as d4a trusts) in 1993, even mentally capable disabled individuals had to file petition in court to establish their own trust if they did not have a parent or legal guardian to set up their trust. The 21st Century Cures Act amends this oversight that prevented mentally capable people from establishing these important programs on their own.

As Peter and Jillian Brevorka explain in the article,

“While the assets in the trust were those of the individual, until the new Act, the trust had to be created for the benefit of the disabled individual by a parent, grandparent, legal guardian or court. Further, the trust must contain a “payback provision,” which requires that upon the death of the individual, an amount equal to the total medical assistance paid on behalf of the individual under a state Medicaid plan be repaid to the affected state(s). Thus, if an individual recovered damages in a personal injury action, he or she would either have to have a parent or grandparent create the trust, or go back to the court and obtain an order directing creation of the trust to receive the damages.”

A first-person special needs trust pays directly for non-covered services or medical equipment. The remainder of a first-person trust typically reimburses the government for what it has paid.

Special needs trusts are critical platforms used by disabled individuals to ensure they are complying with government programs like Medicaid and Supplemental Security Income (SSI). The 21st Century Cures Act rights a decades-long wrong and will now allow capable individuals to take their financial futures into their own hands.

Resources for Families Considering a Special Needs Trust

As a comprehensive planning firm, Milestone Consulting acts as your quarterback in creating the trust, by hiring the right attorney, considering a professional trustee, or weighing the benefits between a pooled and individual trust.  Our settlement experts navigate these issues in all 50 states. 

The Special Needs Alliance (SNA) is a national, nonprofit organization of attorneys dedicated to the practice of disability and public benefits law. SNA connects individuals with disabilities as well as their families and advisors with attorneys who focus on disability law.

For individuals looking for a good professional trustee, Capital First Trust Company is an independent, charted trust company committed to providing clients with custom trust solutions and trust services.

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