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Changing the Face of Special Needs Planning With 3 Simple Words

Gene Kirzhner Nov. 18, 2023

Three simple words could change the face of special needs planning: “by such individual”. Without the proper context behind these three words, you’re probably wondering what exactly their significance is. As we noted in November’s Elder Law Newsletter, special needs trusts are an invaluable vehicle for disabled persons who want to maintain their independence, but don’t want to have to impoverish themselves to do so. Without getting into the technical aspects of the various kinds of special needs trusts available (for further review of this subject matter, you can visit our website), these trusts allow disabled persons to preserve assets while at the same time remaining financially eligible for programs like Medicaid and SSI.

The relevant statutory language authorizing special needs trusts permits “trust[s] containing the assets of an individual under the age of 65 who is disabled…and which is established for the benefit of such individual by a parent, grandparent, legal guardian of the individual, or a court…” (Author’s italics). Special needs planning practitioners often encounter clients who are ideally suited for a special needs trust, but because their clients may not have living parents or grandparents, nor a legal guardian, they are forced to petition the court for creation of their special needs trust in order to conform to the statute. Functionally, this can be a nightmare, as the trust petition becomes the most time-consuming and expensive part of the entire process.

Special needs planning advocates, including the National Academy of Elder Law Attorneys (NAELA), are now attempting to address the issue by adding those three simple words to the statute: “by such individual”. By authorizing the disabled individual to be the person who establishes his or her own trust, an entire cross-section of disabled persons who are without a parent or grandparent to act on their behalf may become able to enjoy the benefits of a special needs trust, but without the high cost and legal headache frequently involved.

When the statute was created in 1993, it was worded with the erroneous assumption that special needs individuals would not be competent to act on their own behalf. Disabled persons and special needs planners now realize the folly of the wording. Individuals receiving awards from personal injury lawsuits commonly suffer from this legislative oversight, as they are perfectly capable of privately creating their own special needs trust, but instead find themselves spending thousands of dollars in additional legal fees in order to have the court establish the trust.