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Arizona Restricts Use of “Self-Settled” Special Needs Trusts

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Last week Elder Law Issues described how a “Special Needs” trust can be used to protect the beneficiary’s access to public benefits programs like Supplemental Security Income (SSI) and Medicaid (in Arizona, AHCCCS or ALTCS). There is one glaring problem with Special Needs trusts just now in Arizona, however—the Arizona Long Term Care System (ALTCS) has aggressively attacked the use of Special Needs trust planning.

It is important to clarify at the outset that ALTCS’ scrutiny of Special Needs trusts has been limited to those funded with personal injury settlements or other funds once belonging to the beneficiary. So far, at least, ALTCS seems to understand that trusts established by parents with their own money for the benefit of children with disabilities should not be challenged.

What are often called “self-settled” Special Needs trusts, though, have come under increasingly intense attack by the ALTCS administration. The government challenges range from demands that the trusts be amended each year, to insistence that the trustee predict exact expenditures for a year in advance, to registering objections to payments for the benefit of the trust’s beneficiary.

ALTCS takes the position that they are not constrained by the straightforward language of federal law on self-settled Special Needs trusts. Although the State will be entitled to receive most, if not all, of the trust assets on the death of the beneficiary, the administrators’ approach seems to be calculated to make the use of Special Needs trusts as unattractive as possible.

Although federal law clearly contemplates that personal injury settlement money, for example, could be used to purchase a home for the beneficiary or pay for caretakers in addition to the care provided through the Medicaid benefit, Arizona imposes severe limitations on both types of expenditures. The State’s demand for an annual budget and its insistence on no deviation without 45 days’ advance notice makes it difficult (if not impossible) to employ the flexibility necessary in administration of the care provided to most disabled beneficiaries.

The practical effect of Arizona’s assault on self-settled Special Needs trusts has been to substantially increase the cost of administration of such trusts and to reduce the benefit to beneficiaries. It would be incorrect to say that Special Needs trusts are no longer useful for Arizona residents, but the ALTCS position makes it imperative that any proposal to establish a Special Needs trust be reviewed by an experienced attorney.

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Robert B. Fleming


Robert Fleming is a Fellow of both the American College of Trust and Estate Counsel and the National Academy of Elder Law Attorneys. He has been certified as a Specialist in Estate and Trust Law by the State Bar of Arizona‘s Board of Legal Specialization, and he is also a Certified Elder Law Attorney by the National Elder Law Foundation. Robert has a long history of involvement in local, state and national organizations. He is most proud of his instrumental involvement in the Special Needs Alliance, the premier national organization for lawyers dealing with special needs trusts and planning.

Robert has two adult children, two young grandchildren and a wife of over fifty years. He is devoted to all of them. He is also very fond of Rosalind Franklin (his office companion corgi), and his homebound cat Muninn. He just likes people, their pets and their stories.

Elizabeth N.R. Friman


Elizabeth Noble Rollings Friman is a principal and licensed fiduciary at Fleming & Curti, PLC. Elizabeth enjoys estate planning and helping families navigate trust and probate administrations. She is passionate about the fiduciary work that she performs as a trustee, personal representative, guardian, and conservator. Elizabeth works with CPAs, financial professionals, case managers, and medical providers to tailor solutions to complex family challenges. Elizabeth is often called upon to serve as a neutral party so that families can avoid protracted legal conflict. Elizabeth relies on the expertise of her team at Fleming & Curti, and as the Firm approaches its third decade, she is proud of the culture of care and consideration that the Firm embodies. Finding workable solutions to sensitive and complex family challenges is something that Elizabeth and the Fleming & Curti team do well.

Amy F. Matheson


Amy Farrell Matheson has worked as an attorney at Fleming & Curti since 2006. A member of the Southern Arizona Estate Planning Council, she is primarily responsible for estate planning and probate matters.

Amy graduated from Wellesley College with a double major in political science and English. She is an honors graduate of Suffolk University Law School and has been admitted to practice in Arizona, Massachusetts, New York, and the District of Columbia.

Prior to joining Fleming & Curti, Amy worked for American Public Television in Boston, and with the international trade group at White & Case, LLP, in Washington, D.C.

Amy’s husband, Tom, is an astronomer at NOIRLab and the Head of Time Domain Services, whose main project is ANTARES. Sadly, this does not involve actual time travel. Amy’s twin daughters are high school students; Finn, her Irish Red and White Setter, remains a puppy at heart.

Famous people's wills

Matthew M. Mansour


Matthew is a law clerk who recently earned his law degree from the University of Arizona James E. Rogers College of Law. His undergraduate degree is in psychology from the University of California, Santa Barbara. Matthew has had a passion for advocacy in the Tucson community since his time as a law student representative in the Workers’ Rights Clinic. He also has worked in both the Pima County Attorney’s Office and the Pima County Public Defender’s Office. He enjoys playing basketball, caring for his cat, and listening to audiobooks narrated by the authors.