New York State Supplemental Needs Trust

New York State Supplemental Needs Trust

A Supplemental Needs Trust (SNT) (also called a Special Needs Trust) receives and holds assets for the exclusive benefit of a person who is disabled. The key feature of the SNT is that it is not considered a reachable or countable asset of the disabled beneficiary for the purposes of qualifying for means-tested government programs. Specifically, a SNT does not jeopardize its beneficiary’s eligibility to receive public benefits like Supplemental Security Income (SSI), or Medicaid.

A Supplemental Needs Trust (SNT) is a legal instrument used to permit people with disabilities to remain eligible for Medicaid and other public benefit programs while keeping financial assets or income that would otherwise disqualify them from those benefits.

In this post, we’ll look at the reasons New York State Supplemental Needs Trusts were created, who is eligible to create an SNT, who can benefit from the SNT, and how the funds held in the SNT can be used. If you think a New York Supplemental Needs Trust might be right for you or a family member, or if you want more information about how to establish a Supplemental Needs Trust, contact our office at Ely J. Rosenzveig & Associates today.

What’s the Purpose of a Supplemental Needs Trust?

The State of New York and the federal government operate publicly funded programs to benefit people whose disability prevents them from earning enough income to support themselves. Medicaid, Social Security, and the Supplemental Nutrition Assistance Program (SNAP) are some examples. But all these programs require benefit recipients to meet financial-need eligibility requirements.

Whether a person suffers a disability from birth, illness, or injury, any countable income or financial assets they own or control will be considered by Medicaid and other programs when determining their eligibility for benefits. The income or assets that exceed the program’s benefit eligibility cap might have come from family members, or from a large personal injury settlement, or from an inheritance. If the valuable assets are “available” to benefit applicants, it will disqualify them  from Medicaid benefits.

The Supplemental Needs Trust (SNT) was created to solve this problem. When income or assets are transferred into an SNT, the assets are owned by the trust and controlled by a trustee who can never be the named beneficiary. Since the assets are no longer owned or controlled by the Medicaid applicant, they are no longer counted or considered by Medicaid for the purposes of determining  Medicaid eligibility.

Who Can Create a Supplemental Needs Trust?

There are several types of SNTs. They vary as a function of who can create them, who controls the assets, and what happens to the trust’s remaining assets when the trust beneficiary dies.

New York State Supplemental Needs Trust

Third Party Supplemental Needs Trusts

In New York, anyone can establish or fund an SNT for the benefit of a disabled person. The assets used to fund the trust must be used for the exclusive benefit of the beneficiary and the beneficiary must not have any power over the assets or how they are used.

Because the funds transferred into a Third-Party Supplemental Trust came from  people other than the disabled SNT beneficiary, whether family members, friends, or strangers, the assets are not subject to a so-called “pay-back” requirement upon the death of the beneficiary.

As you will see in the discussion of Self-Settled SNTs below, the law requires some SNTs to repay Medicaid for the cost of paid benefits if assets remain in a SNT upon the death of the beneficiary. No such requirement applies to Third-Party SNTs. Instead, when a Third-Party SNT is created, terms are included providing for the disposition of any remaining funds after the beneficiary’s death.

Self-Settled Supplemental Needs Trusts

A Self-Settled SNT is created when the beneficiary’s own assets are being used to fund the SNT. The funds can consist of assets they owned when they became disabled, from a large inheritance, or from a large settlement or court judgement. Rather than requiring someone who is disabled to spend down all their assets before qualifying for Medicaid or SSI, the person with special needs can preserve the income or resources in the SNT, by naming someone other than themselves as trustee. The beneficiary of the SNT may not serve as its trustee.

Selecting the trustee of any SNT is an extremely important decision. Though it is not required that an attorney be named as a trustee or a co-trustee, the complexities of SNT record keeping and decision making are best left to a professional with years of experience.

In the past, a Self-Settled SNT, also called a First-Person SNT, needed to be established by a parent or grandparent of the beneficiary, or by order of the court. Then, in 2016, the 21st Century Cures Act changed these antiquated restrictions and finally permitted disabled individuals to create and fund SNTs with their own assets.

The downside of creating a Self-Settled SNT is the mandate that the State of New York Medicaid program be repaid the amount it spent for the beneficiary’s care from any assets remaining in the SNT when the beneficiary dies.

Pooled Trusts

Pooled trusts are a kind of group SNT. A non-profit organization is entrusted with the assets from many SNTs and invests and manages the pooled assets in the aggregate. The Pooled Trust also must contain a “pay-back” clause, but there is an option to gift the money to the charitable organization instead of the state.

Who Can Benefit from a Supplemental Needs Trust?

The beneficiary of an SNT must be “disabled” as defined by the State of New York or have been acknowledged as disabled by the Social Security Administration (SSA). The SSA approves benefits to people who meet a relatively strict definition of “disabled,” and their approval of benefits will suffice to establish an SNT.

The State of New York, on the other hand, has a different definition, one that is a bit less stringent than the SSA’s. New York requires the beneficiary of an SNT to be a

  • “person (i) with mental illness, developmental disability, or other physical or mental impairment;
  • (ii) whose disability is expected to, or does, give rise to a long-term need for specialized health, mental health, developmental disabilities, social or other related services; and
  • (iii) who may need to rely on government benefits or assistance.”[i]

For Medicaid and other needs-based programs to recognize the protections provided by the SNT, the beneficiary must present evidence that they meet either the New York Statutory or the SSA definition of “disabled.”

How Can Supplemental Needs Trust Assets Be Used?

The assets in a New York State SNT must be used exclusively for the beneficiary’s welfare and for the enrichment of their life. But if any of the assets are disbursed to the beneficiary as cash or in another form which could be used to pay the cost of food or shelter, then that disbursement from the SNT may reduce the amount of the beneficiary’s monthly SSI benefit.

The assets in the SNT can be used to benefit the beneficiary by paying for non-covered medical expenses, education, travel, entertainment, special transportation vehicles, modifying the home to adapt it for the disabled person’s use and enjoyment, and virtually any other purpose that enriches or adds to the physical or mental wellbeing of the beneficiary.

Qualified Supplemental Needs Trusts Attorneys Can Tell You More

At Ely J. Rosenzveig & Associates, we have helped many individuals and families create and structure Supplement Needs Trusts for themselves and their loved ones. Our experienced trusts and estate lawyers can also help you resolve difficult issues and problems that might have arisen with an existing SNT that someone else prepared.

If you want to know more about setting up a New York Supplemental Needs Trust, or you need help with a related issue, contact Ely J. Rosenzveig & Associates today. We know how to help you.

Call 1.914.816.2900 or email us at: [email protected]

[i] N.Y. Est. Powers & Trusts Law § 7-1.12(a)(4)

Ariel S. Rosenzveig
Ariel Rosenzveig

Ariel S. Rosenzveig received his Juris Doctor from the Benjamin N. Cardozo School of Law in May, 2011, and has been practicing law with the firm since August, 2011. During his summers while in law school, Ariel interned with the United States Commodity Futures Trading Commission in New York and with the Securities & Futures Commission in Hong Kong, China.

While in law school, Ariel served on the staff of the Cardozo Public Law, Policy & Ethics Journal, volunteered with the Cardozo Advocates for Battered Women, and participated in the National Institute for Trial Advocacy’s Intensive Trial Advocacy Program. Prior to attending law school, Ariel worked as an arbitrage trader for a small proprietary trading firm on Wall Street. Ariel graduated summa cum laude from Yeshiva University in 2006.

Ariel is licensed to practice law in the states of New York and New Jersey, and is a member of the New York State Bar Association (NYSBA), NYSBA’s Elder Law section, and the National Academy of Elder Law Attorneys (NAELA). In June, 2015, Ariel successfully completed a certificate program in mediation through the Program on Negotiation at Harvard Law School.

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