The Elder and Disability Law Firm, APC Dec. 8, 2020

The law used to be that a disabled person had to rely on others to create a trust, to keep government benefits, and, at the same time, to safeguard inherited money or awards won in lawsuits. Since late 2016, disabled people are able to act on their own, independently and this was and is great news for individuals with disabilities.

Consider Dora, a single mother of two small children. Dora became unemployable after she lost the use of her legs in a car accident. She sued the drunk driver, but her case took years to find its way through the courts. While Dora waited for her award, she had to depend on government benefits to pay for food, housing, and medical costs.

When Dora won the suit, she then encountered a different obstacle. If Dora accepted the money directly, she would lose her benefits. The loss of benefits could be devastating, not only for Dora but for her family as well. If Dora accepted the proceeds from the suit, she would have to use the award money to pay for her and her kids’ support, until all of the proceeds are gone. With the cost of medical care and daily living needs, the money would be gone very quickly. Dora needs to speak to an elder law attorney before accepting the award so she can get proper planning in place.

An elder law attorney would probably suggest that Dora put the proceeds directly into a special needs trust. Alternatively, they would be able to draft a plan that would allow Dora and her family to receive the quality of life they deserve. With the new Act in place, Dora would be able to sign trust documents on her own behalf. Prior to the Act, the law required parents, grandparents, or a court to create a trust for her. Dora had no family, so either she would have had to hire a lawyer to petition a court, or she could have used a “pooled trust” with a trustee, not of her choosing. Both of these options imposed extra expense. Worse, if she had to go to court, she would be spending money not on her needs, but, rather, on attorneys’ fees, bonds, filing fees, and expensive court accountings.

And what was the reason for this extra burden? Apparently, the law just assumed that disabled people weren’t smart enough to act for themselves. This unfairly demeaned the disabled and it was simply wrong. Although there are some disabled individuals who are not competent to sign legal documents on their own behalf, there are many who are mentally competent to do so. This Act allows those individuals to be more independent.

The wrong was finally fixed, after twenty-three years of activism by disabled people and other supporting organizations, the new law was signed on December 13, 2016. Now the disabled can enjoy the dignity they deserve.

Here is what Dora can do now, thanks to the change in the law. As long as she remains under age 65, Dora can put her award into her own “self-settled” trust, known variously as a “(d)(4)(a)” trust, or a “supplemental needs trust,” or “special needs trust” (SNT). She can continue to draw benefits to pay for her basic living and medical expenses. She can use her trust money to improve her quality of life and to pay for needs that benefits do not cover. On her death, as long as the trust repays the government for the cost of care it provided during her life, she could leave whatever remained to her children.

These trusts are highly detailed, and the manner in which trust money can be spent requires considerable care, so Dora would still be best advised to consult a lawyer. But she can now act independently, and she can enjoy significant savings in paying her lawyer to write an SNT instead of going to court.

Contact our Redlands, CA office at (909) 888-7100 to discuss your trust needs and for more information.