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Special Needs Trust Fairness Act Passed Committee

By July 13, 2016December 21st, 2017Uncategorized

Breaking News: Committee Approves Special Needs Trust Fairness Act in Package!

On July 13, 2016, the House Energy and Commerce Committee approved the Special Needs Trust Fairness Act (H.R. 670) as part of a small legislative package to improve Medicaid!

The Special Needs Trust Fairness Act lets individuals with disabilities, who have the capacity, to create their own special needs trusts.

Special needs trusts allow persons with disabilities to supplement daily living expenses when government benefits alone are insufficient and protects them against the risk of impoverishment.

But under the current law, only a parent, grandparent, legal guardian of the individual, or a court can establish a special needs trust.

Empower persons with disabilities with responsibility for their own life decisions.

The package also includes Medicaid coverage of tobacco cessation services for mothers of newborns and limiting the use of federal Medicaid funds to cosmetic drugs except when medically necessary.


The Special Needs Trust Fairness Act of 2015 seeks to correct a problem many view in the current law that presumes all individuals with disabilities lack the mental capacity to establish their own special needs trusts. Proponents of the bill state this is false and unfair presumption imposes unnecessary legal fees and costs, court delays, and uncertainty on people who can little afford it. The suggested fix is: H.R. 670 which seeks to add the words “the individual” to 42 U.S.C. § 1396(d)(4)(A) to allow people with disabilities to establish their own individual special needs trusts. The Senate passed a companion version of this bill (S. 349) by unanimous consent on September 9, 2015


People with disabilities who want to live active lives face daunting costs to pay for what others do as a matter of course – from getting out of bed, taking a bath, or feeding or clothing oneself – to more complicated tasks – travel, reading and writing, or working productively. Medicaid may cover the medical and remedial costs for many, but of course there are many more expenses incurred during everyday living. Congress has long recognized the limits of Medicaid; in 1993, it authorized two types of special needs trusts that allow people to set aside funds to pay for supplemental care and meet their non-medical needs while retaining Medicaid. And, prior, Congress added ABLE Accounts, which provide tax incentives for individuals with disabilities to save funds for their non-medical disability needs without loss of Medicaid.

The Problem: “The Individual” is Missing from the Statute

In 1993, Congress authorized two kinds of trusts – individual and pooled non-profit trusts. The law, as drafted, allowed individuals with disabilities to place their funds in a pooled non-profit trust, but in another section left out the words “the individual” thereby failing to allow individuals to establish their own special needs trust:

  • Individual trusts “must be established by a parent, grandparent, legal guardian of the individual, or a court.” 42 USC §(d)(4)(A).
  • Pooled Trusts accounts “must be established by a parent, grandparent, legal guardian of such individual, the individual, or a court.” 42 USC (d)(4)(C)(emphasis added).

More recently, in the related ABLE Act, Congress permitted these accounts to be “established by an eligible individual.” P.L. 113-295

Proponents believe there is no valid public policy reason for prohibiting competent individuals with disabilities from establishing their own individual special needs trusts where all of the other, much more significant requirements are met. These requirements are plainly more important than who signed the document; they are, briefly, that the trust or trust account be:

  • Irrevocable.
  • Provide payback to Medicaid following the death of the beneficiary for all of its expenditures for the beneficiary.
  • Managed by a trustee for the “sole benefit” of the disabled individual.

This legislation would, of course, keep all of these requirements in place.



Matthew J. Leonard, Esq. has devoted his practice to handling the legal needs of individuals and their business interests through all stages of life. As an attorney with the law firm of Leonard Legal Group, P.C., he has been engaged to handle matters from basic to sophisticated involving Estate Planning, Elder Law, Medicaid Planning, Probate, Trust and Estate Administration, Real Estate, Business Transactions, Business Creation and related litigation.