On December 13th President Obama signed legislation known as the 21st Century Cures Act into law. This bipartisan effort, a rarity in today’s administration, includes provisions expanding funding for medical research (notably Vice President Biden’s cancer moonshot research) and combatting the prescription and opioid drug crisis. It also allocates funds to the Food and Drug Administration, improving the drug approval process, which has been widely criticized as being bound in red-tape, inefficient and far too time consuming, often taking ten years or more for a drug to be approved.

One fiscally neutral section of the Cures Act, the Special Needs Trust Fairness Act, is being celebrated by elder law attorneys and disability advocates nationwide, a victory many years in the making. The change on paper is quite simple: the existing statute, section 1917(d)(4)(A) of the Social Security Act, was amended by inserting two words – “the individual” – after “for the benefit of such individual by….” These two words will have a profound impact on the disabled and offer a long-awaited option for estate planning and protecting funds.

Special Needs Trusts (also known as Supplemental Needs Trusts) are a tool by which disabled people can reserve funds but leave them available to use for their benefit, and still qualify for and receive assistance from government programs, such as Medicaid or Supplemental Security Income (SSI.) There are restrictions to the distributions from these trusts to allow a disabled person to remain qualified for government benefits. Among these restrictions: the distribution cannot be made in cash directly to the disabled person, and the distribution cannot be made to provide essential needs such as food or housing. The funds in the trust are meant to supplement and not replace the government benefits which most often provide desperately needed services and support that keep the individual from failing in the community.

The funds in a Special Needs Trust could come from many sources including a Will or another trust, likely a trust set up by a parent for a disabled child. Self-settled Supplemental Needs Trusts, also known as First Party Supplemental Needs Trusts or D4A Trusts are a special type of trust, set up with a disabled person’s own funds (for example, sometimes coming from a legal settlement based on the action that caused the disability.) This type of trust was first recognized statutorily by Congress in 1993. A step in the right direction, they allowed disabled people to use funds set aside for their benefit, but still qualify for government support and services and prevented them from living destitute and becoming impoverished. Under the previous law, these trusts could only be set up by a parent, grandparent, legal guardian or a Court.

This oversight was discriminatory, reflecting a presumption that disabled people lack the capacity to understand and execute trusts. Disabilities are often physical, but result in no loss of mental capacity. Nevertheless, physically disabled people often face obstacles at work resulting in lower paying jobs, while at the same time they encounter costly housing improvements for handicap accessibility and a lifetime of high medical costs. “The Special Needs Trust Fairness Act is about fairness and empowerment – it will give Special Needs individuals the ability to protect their own assets and will end the presumption that all individuals with disabilities lack the mental capacity to handle their own affairs” stated Connecticut State Senator Kevin Kelly.

Passage of the Special Needs Trust Fairness Act will allow disabled people to establish trusts funded with their own assets themselves, ending the requirement that the trust be set up by a parent, grandparent, legal guardian or a Court. Besides empowering disabled people to act on their own behalf, this change also eliminates the expensive, time consuming and inconvenient process of petitioning a local court to create a trust. “No longer will individuals in need of a special needs trust, but without parents or grandparents, face undue legal difficulties” stated Catherine Seal, President of the National Academy of Elder Law Attorneys.

Thanks to this new law, estate planning and elder law attorneys will have another, long awaited and overdue tool in their arsenal to aid and protect clients with disabilities. Attorneys will be able to work directly with disabled clients, who can now establish trusts with their own assets, themselves. As elder law and supplemental needs experts, we are excited that we can now help disabled clients establish and fund their own trusts without expensive court involvement.