As of December 30, 2016, individuals with special needs who have capacity can establish their own special needs trusts. See 21st Century Cures Act, P.L. 114-255, Section 5007 (2016). Previously, first party self-settled special needs trusts could only be created with the help of a parent, a grandparent, a guardian, or the court.
Individuals who did not have parents or grandparents to assist in creating a first party special needs trusts (self-settled SNTs) had to go through a lengthy court process, which was completely contrary to most people’s goal in creating SNTs – to foster independence and self-sufficiency. The restrictively drafted self -settled SNT laws disregarded the fact that many individuals with capacity were ready and willing to create their own SNTs.
Now, with the enactment of the Special Needs Trust Fairness Act, individuals with special needs who meet a few specific requirements may establish their own SNTs. They must have capacity to contract, be under age 65, locate a trustee who is willing to administer the trust, and have assets to place in the trust. They should consider whether a self-settled SNT is the most optimal place for their assets – for example, would a pooled SNT be a better choice? Many considerations play into the choice of trust type, such as cost of trustee, skill of trustee, expenses, trust corpus amount, and more. Joining a pooled SNT may be more economically efficient in the long run, plus pooled SNT are in place already. A self-settled SNT takes time and money to draft and put into effect.
Another alternative to self-settled SNTs is an ABLE account, a special bank account that allows people with special needs to hold assets used to pay for personal care and education without exceeding SSI and Medicaid asset caps. Self-settled SNTs may be a better alternative to ABLE accounts depending on the amount of assets. ABLE accounts are only available to people whose special needs began prior to age 26, only $14,000 may be added to an account every year, and only up to $100,000 is sheltered from affecting SSI eligibility. Self-settled SNTs do not have these limits.
The Special Needs Trust Fairness Act implements a major, and long-needed, change to SNT law. Now individuals with special needs can establish their own self-settled SNTs. Care should be taken, however, to ensure that a self-settled SNT is the best choice for their future.
Rubin Law is the only law firm in Illinois exclusively limited to providing compassionate special needs legal and future planning to guide our fellow Illinois families of children and adults with intellectual disabilities, developmental disabilities, or mental illness down the road to peace of mind. For more information, email us at firstname.lastname@example.org or call 866-TO-RUBIN.