FIRST-PARTY SPECIAL NEEDS TRUSTS AND PROBATE CODE SECTIONS 3600 ET SEQ.âWHAT AB 1851 (STATS. 2004, CH. 67) ACCOMPLISHED
Thomas E. Beltran* and Peter S. Stern**
A first-party, special-needs trust ("SNT") is essentially a discretionary, spendthrift trust into which a recipient of needs-tested public benefits can transfer assets that otherwise would render the individual ineligible for the benefits.1 Although special-needs trusts are certainly not uncommon these days, prior to the passage of AB 3328 (Stats. 1992, ch. 355), which amended and added to Probate Code §§ 3600-3612,2 there were no provisions either in California’s Probate Code or in federal Medicaid law that allowed a public-benefits recipient to set aside money received from a judgment or settlement in a special-needs trust.3 The recent amendment of §§ 3600-3613 by the passage of A.B. 1851 (Stats. 2004, Ch. 67, effective January 1, 2005) made significant changes in the first-party, special-needs trust area.
This article will review the features of the 1992 enactment, which was quite novel for its time, discuss the law in the context of public benefits, and review the impact of subsequent federal legislation. Finally, the article will describe shortcomings in the 1992 legislation and the corrective measures accomplished by the 2004 amendments.