Monthly Archives : January 2017

First Party Special Needs Trust

FIRST PARTY SPECIAL NEEDS TRUST
The Amendment to the Omnibus Budget Reconciliation Act of 1993 allows the person with disability to create the First Party Special Needs Trust (OBRA Payback Trust) himself or herself.

In 1993, Congress passed a law as part of the Omnibus Budget Reconciliation Act of 1993 (OBRA ’93) allowing a person with a disability to transfer his or her solely owned assets to a first party special needs trust (1st Party SNT); however, this trust had to be created not by the person with the disability, but by a parent, grandparent, court or guardian on behalf of the person with the disability.  See 42 U.S.C. Section 1396 p (d) (4) (A). The 1st Party SNT (also sometimes called an OBRA Payback Trust) is appropriate for a person with a disability who is under age 65, and but for her or his separate assets, would otherwise be eligible for needs based government benefits, such as Supplemental Security Income (SSI) and Medicaid.   Assets assigned to the 1st Party SNT will not be counted by SSI or Medicaid as available to the claimant; yet the assets held in the trust can be used to provide for those things for the benefit of the claimant that are not otherwise paid for by government benefits.

On December 13, 2016, President Obama signed into law the “21st Century Cures Act” (hereinafter referred as “the Act”).  Section 5007 of the Act, entitled “Fairness in Medicaid Supplemental Needs Trusts”, allows the person with a disability to establish the 1st Party SNT himself or herself, whereas before only a parent, grandparent, guardian or the court had authority to establish a 1st Party SNT.

The amendment resolves a gap that existed in the law for over twenty years. As of December 13, 2016, persons who are mentally capable will now be able to establish their own 1st party SNT.

2017 Estate and Gift and Generation Skipping Tax Exemptions

While there may be efforts with the new administration to repeal or otherwise replace the Federal Estate and Gift Tax, as of January 1, 2017, the Federal Estate and Gift and Generation Skipping Taxes remain in force.  The 2017 Estate and Gift and Generation Skipping Tax exemptions will increase from $5,450,000 to $5,490,000.  The annual exclusion for a gift will remain at $14,000 per donee.

Illinois retains a separate estate tax.  The Illinois exemption remains at $4,000,000.