A First Party Special Needs Trust is a very powerful tool that allows an individual with a disability to protect a large sum of money from counting against them with regard to qualifying for needs based governmental programs, such as Medicaid and Supplemental Security Income (SSI). By federal law, a First Party Special Needs Trust can hold the individual’s assets and allow the individual to benefit from the funds without risk of losing their public benefits. Previously, the federal government has only allowed the individual’s parent, grandparent, guardian, or a court of proper jurisdiction to create the First Party Special Needs Trust. This created some unnecessarily unfair situations where an individual may not have had a parent, grandparent or guardian at the time when a Special Needs Trust was needed. A large number of First Party Special Needs Trusts are created upon the death of the parent, when the individual inherits a large sum of money. Since the parents and grandparents were no longer living, the individual often required a court to create the First Party Special Needs Trust, adding unnecessary delay and expense.
In December 2016, President Obama signed the Special Needs Fairness Act into law and we are happy to report that the New York State Department of Health has issued a General Information System (GIS) message that states “effective immediately, in the case of a certified disabled Medicaid applicant/recipient, districts must not consider as available income or resources the corpus or income of a trust established by such disabled individual when he or she was under 65 years of age, provided the trust otherwise complies with the ‘exception trust’ provisions…”. This means that the Special Needs Fairness Act allows the individual with a disability to create a First Party Special Needs Trust to hold their assets while still allowing eligibility for Medicaid, SSI, and the like. The passage of the Act is important as it ends the ends the incorrect and unfair presumption that all individuals with disabilities lack the mental capacity to handle their own affairs. Many individuals who qualify for a Special Needs Trust handle their personal affairs on their own every single day. In order to create a First Party Special Needs Trust, the individual must be under the age of 65, certified as an individual with a disability, and have the mental capacity to understand the document they are creating.
The passage of this law allows for more flexibility in allowing individuals with disabilities to live their lives beyond what public benefits provide for. If you or someone you know would like to learn more about First Party Special Needs Trusts, contact a qualified attorney who is knowledgeable in the area to help guide you.