CONGRESS MAKES A LONG OVERDUE FIX
In 1993, Congress enacted the Omnibus Budget Reconciliation Act of 1993 (commonly referred to as OBRA 93). Section 1396p(d)(4)(A) of OBRA was a godsend for many people living with disabilities and receiving public benefits such as Supplemental Security Income (SSI). Most benefit programs (such as SSI) have asset limitations that require recipients have almost no money. These strict limitations created problems for persons with disabilities who unexpectedly received a sum of money (such as an inheritance). Exceeding the asset limits of the benefit program often resulted in the loss of critical income and essential medical coverage.
Congress recognized this problem and OBRA 93 allowed a parent, grandparent, guardian or a court to establish a “Self-Settled Special Needs Trust” for any persons with disabilities under the age of 65. (Also called a “First Party” or “D(4)A” Trust) This new type of trust could be funded with the person with disabilities’ own money and, most importantly, the money in the trust didn’t count toward benefit program asset limits. This change, however, did not come without a catch. If there were funds remaining in the trust when the person with disabilities died, the government could recoup any support monies paid out through benefit programs. (The first party trust stands in contrast to a “third party” trust which can only be funded with assets from someone other than the person with disabilities. A third party trust is not required to have a benefit payback provision.)
Although Congress’ action was greatly appreciated by the disability community, it contained one glaring mistake. The law allowed a “parent, grandparent, guardian or a court” to establish a trust. Notice something missing from this list? Ironically, whether through oversight or ignorance, Congress neglected to include the persons with disabilities themselves as someone eligible to create a “self-settled” trust. The person with disabilities could fund a trust, but they couldn’t create one. This meant otherwise competent persons with disabilities who didn’t have a parent or grandparent had to go through the expense and hassle of petitioning a court to establish a trust on their behalf. Unbelievably, it is widely rumored that OBRA drafters realized their error at the last minute but a broken fax machine prevented revised language from being included in the final bill.
So, here we are. Twenty-three years after Congress got it half right, they’ve finally gotten around to fixing their mistake. On December 13, 2016, President Obama signed the 21st Century Cures Act. Section 5007 of the Act is called “Fairness in Medicaid Supplemental Needs Trusts” and makes a very simple amendment to 42 U.S.C. Section 1396p d(4)(a), adding “the individual” to the list of persons who can establish a first party or self-settled special needs trust (SNT). A very small change that fixes a very big problem. Competent persons with disabilities can now create their own trusts and preserve eligibility for public benefits. One small step in the long march of progress.
If you have any questions about special needs trusts or other types of disability planning, please contact our office and schedule a consult. As always, thanks for reading.
Barry M. Meyers
David M. Neubeck
Elder Law Offices of Barry M. Meyers
 This is not the same as Social Security Retirement that is earned during a person’s working career. SSI is a program that assists persons with disabilities who are unable to work.
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