Alert - Recent Law Change for Self-Settled Special Needs Trusts

A Self Settled Special Needs Trust (“SNT”) is often used to hold and administer funds belonging to a disabled person who receives SSI and Medicaid benefits. The SNT supplements his or her needs while allowing the person to retain government benefits. Such a trust must be “for the sole benefit” of that particular beneficiary. At the beneficiary’s death, the remaining trust balance, if any, is paid to Medicaid as reimbursement for its expenses on the person’s behalf. Recently the Social Security Administration narrowed its permissible trust expenditures specifically related to travel to ensure the expenditures are for the benefit of the disabled person and not his or her family. As a result, existing SNTs with language that violates the new directive from Social Security could be deemed invalid, causing the beneficiary to lose SSI. If the beneficiary’s Medicaid is dependent upon SSI, Medicaid could also be lost. Therefore, it is critical that the trustees of existing SNTs consult with their legal advisor to determine whether the trust needs reformation to assure continued compliance.

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