First Party Special Needs Trusts
On December 13, 2016, President Obama signed the 21st Century Cures Act (P.L. 114-255). Section 5007 of this law contains the “Fairness in Medicaid Supplemental Needs Trusts,” which added the words “the individual” to the laws governing First Party Special Needs Trusts. First Party Special Needs Trusts must have the payback provisions to the States for the Medicaid benefits received by the beneficiary of the Trust. The beneficiary of the First Party Special Needs Trust must be under age 65 in order to establish the Trust. Persons who are mentally capable and under age 65 years are now able to establish their own First Party Special Needs Trusts. Prior to December 13, 2016 a First Party Special Needs Trust could only be established by a parent, grandparent, a guardian or a court.
The law now reads as follows:
(A) A trust containing the assets of an individual under age 65 who is disabled (as defined in section 1382c(a)(3) of this title) and which is established for the benefit of such individual by [the individual], a parent, grandparent, legal guardian of the individual, or a court if the State will receive all amounts remaining in the trust upon the death of such individual up to an amount equal to the total medical assistance paid on behalf of the individual under a State plan under this subchapter.
–42 U.S.C §1396p(d)(4)(A).
This change reflects more than 20 years of advocacy on the part of the National Academy of Elder Law Attorneys and other advocates for persons with a disability.
This new law allows the Special Needs planner to give families and individuals with Special Needs an easier and more cost efficient method to establish and fund a First Part Special Needs Trust. However, court approval may still be warranted to establish some First Party Special Needs Trusts. We are waiting for the State of Michigan to update our state manual to reflect the change at the Federal level.
As previously discussed in a Commentator article, the ABLE Accounts are now up and running in Michigan. The ABLE accounts are another useful tool in the Special Needs planners’ tool box.
ABLE accounts allow persons with a disability to have accounts that are sheltered from being counted as a resource for public benefits up to certain limits. ABLE accounts have four limitations to keep in mind. 1. Only a person whose disability occurred prior to age 26 years can qualify to establish an ABLE account. 2. There is a $100,000 limit for SSI eligibility. 3. A limit of $14,000 total can be added to the account each year. 4. A qualified person with disabilities can only have one ABLE account. The maximum amount for Michigan to remain eligible for Medicaid is $500,000.
A very good source of information on ABLE accounts and the procedures to establish an ABLE account can be found at www.miable.org.
Pooled Account Trusts
Pooled Account Trusts are another option available for individuals with a disability. Pooled Account Trusts must be established by a non-profit organization and are a form of a Special Needs Trust that can be used to hold assets that would otherwise disqualify beneficiaries with disabilities who receive Medicaid or SSI benefits. There are fees and costs to be considered with a Pooled Account Trust. Thomas V. Trainer and Brian R. Jenney assist Elder Law of Michigan with the administration of their Pooled Account Trust.
For further information regarding these matters, please contact Mr. Jenney at 248.740.5688 or via email.