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Spotlight: The Special Needs Trust Fairness Act of 2015

Spotlight: The Special Needs Trust Fairness Act of 2015

Greasing the wheels of progress for individuals with special needs

After failing to pass the previous Congress, a new version of the Special Needs Trust Fairness Act of 2015 (the Act), a bill designed to streamline the process by which those with special needs can set up their own first-party special needs trusts, was introduced by Congressmen Glenn Thompson (R-Pa) and Frank Pallone, Jr. (D-NJ) in February and is currently under debate.

A special needs trust is a vehicle that’s tailored to manage assets for a person with special needs without compromising his access to certain government benefits, primarily Medicaid and Supplemental Security Income (SSI). In order to qualify for SSI, a program designed to assist low-income people with special needs, an individual must either have less than $2,000 to his name or, if his personal assets exceed $2,000, they must be placed in a first-party special needs trust.  

What most people think of when they think of a special needs trust—a parent, family member or guardian putting some of his own assets in a trust to assist an individual with special needs—is actually known as a third-party special needs trust. A first-party special needs trust, the subject of this bill, has some subtle but important differences. First, the assets in the trust belong to the individual with special needs, not some generous benefactor. Second, though the contents of a third-party special needs trust can freely pass to heirs or charity on the beneficiary’s death, assets left in a first-party special needs trust after the beneficiary passes must be used to reimburse the government for the individual’s medical care—the price of the “have your cake and eat it too” nature of this vehicle.

What the Act seeks to address is the fact that an individual with special needs (the beneficiary), regardless of his level of competence, isn’t allowed to set up his own first-party special needs trust, even though the assets that form the body of the trust belong to him. Currently, only a beneficiary’s parent, grandparent or a court can create such a vehicle. These strictures effectively force otherwise independent individuals with special needs to either rely on the assistance of their family (who may not be living, capable or on good terms) or spend large sums of money petitioning courts to establish trusts for them. The Act simply seeks to add the individual with special needs to the list of people who can create a first-party trust on his behalf.

According to Pallone: "The barriers that currently prohibit an individual from creating a Special Needs Trust, despite having the mental capacity to do so, have no basis in reality and place an undue burden on disabled individuals who are simply trying to make ends meet."

A recent report by the Congressional Budget Office estimated that the cost over the next 10 years to implement this bill would be roughly $8 million, the vast majority of which would be attributable to more people gaining earlier access to Medicaid and SSI.

The Bill


1st Session

H. R. 670


February 3, 2015

Mr. Thompson of Pennsylvania (for himself and Mr. Pallone) introduced the following bill; which was referred to the Committee on Energy and Commerce


To amend title XIX of the Social Security Act to extend the Medicaid rules regarding supplemental needs trusts for Medicaid beneficiaries to trusts established by those beneficiaries, and for other purposes.

1.Short title

This Act may be cited as the “Special Needs Trust Fairness Act of 2015”.

2.Fairness in Medicaid supplemental needs trusts

(a)In general

Section 1917(d)(4)(A) of the Social Security Act (42 U.S.C. 1396p(d)(4)(A)) is amended by inserting “the individual,” after “for the benefit of such individual by”.

(b)Effective date

The amendment made by subsection (a) shall apply to trusts established on or after the date of the enactment of this Act.



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