Understanding the Basics of a New York Special Needs Trust

Rose and Al are a successful couple approaching retirement. Over the years, they’ve built a successful business, raised five children, including a son with special needs, and provided a stable upbringing that included the best education, a beautiful home, memorable vacations, and everything parents dream of giving their children.

Now adults, four of their kids have families and homes of their own. However, as Rose and Al grow older, they have become increasingly concerned about the welfare of their adult child, Ralph, born with Down syndrome. Although his disability never stopped him from living a full and productive life that includes a full-time job, babysitting for his nieces and nephews, and bringing joy to everyone he meets, Rose and Al worry about his special needs and long-term care in the future, especially if they pass before him.

Who will be there to pay his bills, ensure he receives adequate medical care, and uphold his quality of life? Can he qualify for public benefits as a disabled adult, despite his parents’ income?

As an experienced estate planning attorney can attest, a New York Special Needs Trust is a powerful tool that can secure the future for disabled individuals like Ralph and provide peace of mind for those who love them. This blog from a special needs trust attorney on the East End of Long Island delves into the basics of a special needs trust in New York, including eligibility requirements and how it can procure long-term care for our loved ones after we’re gone.

Continue reading to learn more, then contact us at (631) 506-8440 to schedule a consultation.

Benefits of a Special Needs Trust

A special needs trust helps disabled individuals maintain their social security benefits from Supplemental Security Income (SSI) and Medicaid benefits while protecting their income and assets. Moreover, an SNT allows the disabled adult to determine how to spend their funds. The trustee, whether an individual or a financial organization, handles and manages the assets of the disabled person.

An SNT has a twofold purpose:

Protect the income and assets of a disabled person receiving Medicaid or Supplemental Security Income (SSI)
Remove the necessity of spending down excess income to qualify for Medicaid

An SNT acts as a supplement – not a replacement – of benefits. If the disabled person is under 65 and receives a lump sum, such as a personal injury settlement or an inheritance, a Special Needs Trust can help preserve their eligibility for public benefits.

With an SNT a disabled adult can utilize their additional income to complement their regular earnings in the present and the future. Additionally, a disabled person who puts income into a supplemental needs trust might qualify for a Medicare Savings Program.

Qualifying as a Disabled Person for a Supplemental Needs Trust

Whether you or a loved one is physically or mentally disabled, dealing with a persistent disability, or facing chronic illness, this legal estate planning tool secures additional income and support while preserving public benefits. By establishing a trust, you can supplement Medicaid or Social Security without compromising qualification requirements. For more information about the disabilities recognized by the Social Security Administration, click here.

Is an SNT a Revocable Trust?

Special needs trusts cannot be changed or revoked without the beneficiaries’ consent. The assets in this trust are solely intended for the beneficiary and enjoy protection against being claimed in a lawsuit or by creditors.

Types of Supplemental Needs Trusts

Third-Party SNT

A Third-Party Supplemental Needs Trust (SNT) is a powerful ally to secure the financial future of a disabled adult. Unlike other types of trusts, this unique estate planning tool allows anyone other than the disabled beneficiary themselves to establish it. A sibling or parent can create an SNT to provide for siblings or other family members, without relying on the disabled individual’s funds.

With a Third-Party SNT, the funds can be derived from multiple sources including inheritances, generous gifts, or even proceeds from a life insurance policy.

Self-Settled Special Needs Trust (SNT)

Also known as a First-Party SNT, the Self-Settled Special Needs Trust is a legally binding trust that was authorized by the Omnibus Budget Reconciliation Act of 1993. These trusts allow disabled individuals to utilize their own funds or money they receive from an inheritance or a personal injury lawsuit.

A disabled adult in New York must provide proof of their disability through the Supplemental Security Income (SSI) or Social Security Disability program to establish a Self-Settled SNT. They can either establish the trust on their own if they are under the age of 65, or have a parent, grandparent, guardian, or court establish it on their behalf.

If the beneficiary of the SNT is under the age of 65 when setting up the trust and transfers their funds to the SNT, it does not impact their eligibility for nursing home benefits through Medicaid because the trust is considered a “payback” trust.

If the disabled beneficiary passes away or terminates the Self-Settled SNT, the funds in the trust will reimburse Medicaid for any expenses incurred during the beneficiary’s lifetime. Any funds that remain after reimbursing Medicaid may be distributed to the beneficiary of the trust.

Pooled Self-Settled Special Needs Trust

A reputable nonprofit association manages a Pooled Self-Settled Special Needs Trust (SNT). Designed specifically for individuals over 65 years old, a Pooled Self-Settled SNT allows you to securely deposit your income into a pooled trust. In turn, each beneficiary receives their own separate account. When the beneficiary passes away, any remaining funds are safeguarded by the trusted nonprofit/charity.

This type of trust particularly benefits disabled individuals on a fixed income that surpasses Medicaid’s monthly income limits. By depositing excess income into the pooled trust, they can adhere to Medicaid’s income limitations for home care while utilizing the funds for household expenses.

Assets can also be transferred to a charitable organization.

Proper Administration of a Special Needs Trust (SNT)

Administering a Special Needs Trust (SNT) requires compliance with specific guidelines outlined in the ESTATES, POWERS & TRUST LAW. Chapter 17-b, Article 7-1.12 of the Consolidated Laws of New York. This ensures that the funds are used solely for the disabled person’s special and supplemental needs.

However, determining which expenses are eligible for payment from the SNT can be daunting. To ensure compliance and proper allocation of funds, engage the services of an experienced estate planning lawyer with the knowledge and experience to identify and approve expenses that genuinely meet the beneficiary’s special needs.

The administration of the SNT involves various responsibilities for the trustee, including making distributions, handling tax returns, and executing other essential duties associated with managing the trust.

Don’t underestimate the significance of accurate and knowledgeable administration for a Special Needs Trust. Trust in professionals who grasp the intricacies involved to safeguard the beneficiary’s financial well-being.

Sheryll Law, P.C. Creates Special Needs Trusts that Protect Adults with Disabilities and Give Parents and Families Peace of Mind

Have you been searching online for a “special needs trust attorney near me?” Like Rose and Al, do you have a beloved disabled adult in your life? Are you concerned about maintaining eligibility for public benefits and how to pay for long-term care?

Experience estate planning on the East End of Long Island that caters to your individual needs and desires. An experienced special needs trust attorney at our firm can guide your family through the process of creating a trust that complies with New York law, protects the assets of a disabled person, allows them to receive public benefits, and provides the resources and care they need throughout their lifetime. Our attentive staff will help you protect your family and pass your assets down from generation to generation with personalized documents and a streamlined process.

The information in this blog post (“post”) is provided for general informational purposes only and may not reflect the current law in your jurisdiction. No information in this post should be construed as legal advice from the individual author or the law firm, nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this post should act or refrain from acting based on any information included in or accessible through this post without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the recipient’s state, country, or other appropriate licensing jurisdiction.

Sheryll Law, P.C.
633 East Main Street, Suite 2
Riverhead, New York 11901
(631) 506-8440
https://sheryll-law.com/