How Does a Special Needs/Supplemental Needs Trust Work in New York?

Melville, NY Estate Planning Lawyers explain special needs trusts. Call (631) 756-6006 to schedule a consultation. 

As millions of Baby Boomers become part of the elderly population, many make arrangements for their retirement and long-term medical care. However, this demographic also acts as primary caregivers for many non-elderly disabled children who will need sufficient care for years to come.

That is why many people in New York search online for a “trust attorney near me” to learn about special needs trusts. These special needs trusts play a significant role in long-term care for disabled persons because they will be active after their donors pass away.

What Is a Special Needs Trust?

A special needs trust is also called a supplemental trust or SNT.  An SNT is designed to allow a person with a severe and chronic disability to supplement, not replace, the kind of essential support provided by government programs like Medicaid and Supplemental Security Income (SSI). The person who sets up the SNT does not have to be alive to ensure that the money goes to the beneficiary.

After researching for a “trust attorney near me” online, most people who need to create an SNT do so by contacting a trust lawyer. The trust lawyer may include an SNT as part of the client’s will to become effective when they pass away.

Types of Supplemental Needs Trusts

Third-Party SNT

Anyone other than the intended disabled beneficiary can create this SNT. For instance, a sibling or parent may initiate an SNT for other family members using their money, not the earnings of the disabled persons. The funds within a Third-Party SNT can come from an inheritance, gifts, or proceeds from a life insurance policy.

Self-Settled SNT

Also called a First-Party SNT, a Self-Settled SNT is an irrevocable trust that the Omnibus Budget Reconciliation Act of 1993 authorizes. These SNTs use the disabled beneficiaries’ funds or monies they receive from an inheritance or personal injury lawsuit.

For a disabled person in New York to create a Self-Settled SNT, they must have proof of their disability through SSI or Social Security Disability. The person must be under 65 can establish the trust on his/her own or have a parent, grandparent, guardian, or court establish the trust on their behalf.

As long as the SNT beneficiary is under age 65 when establishing the trust, transferring their money to the SNT does not create an ineligibility period for nursing home benefits through Medicaid because it is considered a “payback” trust.

If the disabled beneficiary dies or terminates the Self-Settled SNT, the fund will reimburse Medicaid for expenses incurred during their lifetime. Should the trust have remaining funds after “paying back” Medicaid, the money may go to the trust’s beneficiary.

Pooled Self-Settled SNT

A nonprofit association manages an SNT, the charitable organization handles a Pooled Self-Settled SNT. These Trusts can be established to protect income or assets.

In most cases, people participate in a Pooled Self-Settled SNT when they are over 65 years old. The donors can deposit their income into a pooled trust. The money goes into separate accounts for each beneficiary. At the time of the beneficiaries death any monies remaining are kept by the non-profit/charity. 

This type of SNT is necessary because it works best for disabled beneficiaries with a fixed income that exceeds Medicaid’s monthly income limits. Participants can deposit their excess income into the pooled trust to stay within Medicaid’s income limitations for home care and still use the money to pay for household expenses.

Assets can also be transferred to a charitable organization.

Administration of an SNT

According to the provisions set forth in ESTATES, POWERS & TRUST LAW, Chapter 17-b, Article 7-1.12 of the Consolidated Laws of New York, an SNT is only to be used for a disabled person's special and supplemental needs. However, it can be challenging to understand and distinguish between expenses that can be paid from the SNT and those that are not eligible. Therefore, you must retain an estate planning lawyer who understands which expenses for the beneficiary's special and supplemental needs may be paid from the SNT.

The trustee will need to make distributions, file tax returns, and carry out numerous other duties that go along with administering a trust.

SCHNEIDER, GARRASTEGUI & FEDELE PLLC –– Estate Planning Lawyers You Can Trust

Are you searching online for a “trust attorney near me” because you want to know more about SNTs in Melville, New York? Instead, reach out to the legal team at SCHNEIDER, GARRASTEGUI & FEDELE PLLC. Our estate planning lawyers have over 30 years of experience in estate planning and elder law, so we can help you navigate an SNT.

At SCHNEIDER, GARRASTEGUI & FEDELE PLLC, we strive to give every client and their family members peace of mind. A skilled trust attorney from our firm will help you protect your assets. To speak with an estate lawyer about setting up an SNT or answer any questions you may have, call (631) 756-6006 to schedule a consultation.

Copyright© 2022. SCHNEIDER, GARRASTEGUI & FEDELE PLLC. All rights reserved.

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.

SCHNEIDER, GARRASTEGUI & FEDELE PLLC
135 Pinelawn Rd #250s
Melville, NY 11747
(631) 756-6006
https://isvglaw.com

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