What is A NY Special/Supplemental Needs Trust?
Basically, a special needs trust and or a supplemental needs trust is a trust that is created to benefit and or provide for a person who suffers from disabilities and is disabled and who might be receiving government benefits, including Medicaid and or disability payments from the government. The special needs trust or supplemental needs trust allows for that disabled person to be provided for and or left an inheritance and still be allowed to retain their governmental benefits including Medicaid and or disability payments. The funds that are placed into the supplemental or special needs trust can be used to pay for things that the disabled person needs and or wants without losing their governmental benefits.
Why Should Only An Experienced NY Special Needs Planning Attorney Be Retained For A Special Needs/ Supplemental Needs Trust?
Essentially, people that have disabilities, fall into a different type of category, and obviously need a unique type of planning executed for them if they are to be provided for and or left an inheritance.
In this area of special needs planning in NY, a lawyer has to be well versed in order to do the planning for those special individuals. Meaning that a lawyer doing the estate planning for people who have family members that are disabled, must know how Medicaid works and how the disability benefits are paid to these individuals.
The NY special needs planning lawyer must also understand the ramification of how getting an outright inheritance if you are disabled could ultimately cause those individuals to lose those government benefits, including Medicaid and or disability payments that they are entitled to from the government. That is why a special needs trust or a supplemental needs trust is necessary so that a person can be provided for and obtain an inheritance and still maintain their governmental benefits.
This type of planning needs to be done by someone who is well-versed and very familiar with NY Medicaid law and how it relates to people with disabilities. Special-needs planning should not be done by the general practitioner who is not familiar with the special issues faced by individuals with disabilities.
If a family member has adult children or minor children that are disabled in New York and are obtaining Medicaid and disability payments from the government and they wish to leave an inheritance to them at their death or wish to provide for them before death, a special needs trust/supplemental needs trust is what is necessary. This type of trust is very different from other types of trusts created for people who don’t suffer from disabilities.
That is why this trust must be drafted by someone experienced in this type of planning and not be left to chance by the general estate planning attorney who is not familiar with NY Medicaid law and or disability law.
A great disservice will be created by such a lawyer if he or she is not familiar with the special issues faced by persons with disabilities and the negative effects that an outright inheritance can have on such a person if not placed in a special needs trust.
If not done properly such an inheritance could cause a person on disability to lose their governmental benefits including Medicaid and their disability payments.
The third party trusts is very important for people that have minor children or, or even adult children, or any other family members that suffer from disabilities and are receiving government benefits.
These individual that have family members who are disabled want to make sure that when they do their estate planning; that their estate planning includes the creation of a third party supplemental needs or special needs trust for the benefit of that family member or that child that is disabled, even if they are an adult.
Because when they leave this world and they want to leave an inheritance for that child or other family member who has disabilities, they have to do so in a proper manner, meaning that they have to do that through a supplemental or special needs trust.
They cannot leave that disabled person an outright inheritance because that disabled person would then lose their government benefits. The disabled person would get knocked off of Medicaid and or they would also lose their disability payments. So you do not want to do that, and the way you avoid causing that problem is by creating a third party supplemental or special needs trust for that disabled person.
For example, if you passed away and you had a disabled minor or adult child that was on disability and Medicaid, your will and or living trust must make provisions for that child in a properly drafted supplemental needs trust.
Obviously if you leave a bequest or inheritance, or any other gift, to person who is disabled, how are they going to manage their own affairs? They will not be able to do that. So that is why you want to be able to do the proper planning, and the proper planning involves having a supplemental needs trust created so that they can have their inheritance properly managed.
This will require you to have a well versed NY special needs planning attorney that knows what they are doing as opposed to the general practitioner or the general estate planning lawyer that would probably, and I have seen it, leave bequests or gifts to a person that has disabilities out right or in the wrong type of trust which will cause a lot of problems.
When the correct planning is done the attorney must find out if the estate plan is going to be leaving any inheritance to people who are on disability and or Medicaid, this is crucial to a proper estate plan.
Most lawyers who are not familiar with Medicaid or disability law do not understand or know what will happen to that disabled persons governmental benefits, when they leave them an outright inheritance in a will or trust.
They do not realize that A, that person will get knocked off of Medicaid and or lose their disability payments from the government, and also that they are not in a position probably to be managing their money.
So you want to avoid that. That is a big problem. A supplemental needs trust with the appropriate language is what is required in order to continue government benefits.
It is very important to seek out the proper special needs planning attorney like myself that knows what they are doing in order to leave a proper inheritance for that person.
Are There Different Types Of Special Needs/ Supplemental Needs Trusts Available?
Yes. There are what are known as third party supplemental special needs trusts, which basically means that they are trusts that are established by third parties, meaning by a person that is not disabled is creating the trust for the benefit of a person who is disabled. It could be set up by a family member or anyone else.
That type of trust is set up for the benefit of that disabled person or persons with special needs, which means that a trustee has to be appointed. It is an irrevocable trust that is set up, and those third party trusts are used to benefit that person with special needs or with disabilities or who is on disability.
The biggest reason or advantage of that type of trust is obviously to leave an inheritance, or even provide for that person with special needs or disabilities while they are still alive so that they can have the things that they need in life provided to them, meaning that, for instance if they have assets put into that special needs trust or supplemental needs trust, those assets could be used to provide for all of the things that a person who is disabled would want or need without knocking them off of Medicaid and or causing them to lose their disability payments.
For instance, if a disabled individual has assets above the very minimum threshold amount, that in and of itself would cause them to lose their governmental benefits in many instances, meaning they would not be able to get Medicaid to take care of their medical bills. They could also lose their income stream from monthly disability benefits which are paid from the Federal Government. So the special needs trust/ supplemental needs trust is there to provide for the things that person would need and or want and at the same token, allow them to continue getting their government benefits so they get the best of both worlds.
A third party trust allows for no payback provision to the Medicaid program, which means basically upon the demise of the disabled person any money left in the trust can be left to another person or persons as contingent beneficiary. This is a great benefit to the third party trust, because it allows for the inheritance to continue on to other persons.
A first party SNT is different from a third party trust, because it is created by the individual who actually is disabled and is funded by their own money for their benefit and not funded by funds belonging to others. For example, the first part trust would be needed and necessary if a disabled person would be coming into money from a personal injury award or an inheritance. Those funds would be considered funds that belonged to the disabled person and would require the formation of a first party special needs trust and not a third party trust.
So a first party trust is a very different type of trust then that of a third party trust, because a third party trust would be set up by someone else and not the disabled person.
Another big difference is that on a first party supplemental needs trust, or SNT trust, you have a pay-back provision, which means that upon the demise of the disabled person that the trust was created for, whatever monies that remain in the trust after the disabled person passes away must be paid back to Medicaid to cover basically all of the expenses that Medicaid paid out for governmental benefits on behalf of the disabled person. And then if any funds remain after the bay back provision is met the remaining funds can then be left to the estate of the disabled person.
For example, if a disabled person passed away and the money that was left over in the trust was able to cover whatever expenses that Medicaid laid out, that would have to be paid back first before there could be any contingent or remainder beneficiaries that could inherit from the trust.
That is a big difference between the first party SNT and a third party SNT.
Of course, if a person does have special needs or is disabled, they are not a person that could be managing their own funds or money because of their disabilities, so they need somebody, a trustee, to be managing their money and or assets to provide for them.
Get all the help you need to set up a special needs trust in New York by contacting our NY special needs planning attorneys. Our special needs planning lawyers know how to set up a supplemental needs trust and they also understand the different types of special needs.We also have estate planning attorneys and estate planning lawyers who understand the local laws and know how to set up a trust or estate in New York. We also help elderly patients and people with their Medicaid planning as well as with elder law. Contact The Law Offices Of Michael Camporeale P.C. in New York by calling (718) 475-9639 for a Free Consultation. We serve many areas in New York, including Staten Island, New York, Brooklyn, Bronx, White Plains, Garden City, and Melville. Visit our offices today to talk to our estate planning lawyers and elder law attorneys.
Who Is Actually Able To Create A third party Special Needs Trust?
Anybody could set up a third party supplemental needs trust for a person who is disabled. So for instance, a parent, a grandparent, a brother, or a sister or any other family relationship or even a friend could set up a third party special needs/ supplemental needs trust with their funds for the benefit a person who is disabled.
These trusts could be set up one of two ways. They could be set up as a living trust, meaning the trust could be created and funded while the person that is creating the trust is alive. So, for example, say I wanted to create a trust for someone who was disabled and I wanted to use my money to fund that trust while I was alive that could be done.
I could create that living special needs/supplemental needs trust now and fund it now while I am alive, and it would be benefiting somebody that suffers from disabilities, and I could even name myself as a trustee to manage the trust assets for the disabled person.
In addition, the other way that a special needs trust/supplemental needs trust is created is in your living trust or your will. However, you could choose to fund the trust after you pass away, for example, if I wanted to, once again, set up the trust, but I did not want to fund it now while I was alive, I could make a provision in my will or living trust that could leave an inheritance to someone who has special needs or was disabled or on disability, which would be funded at my death.
Meaning that upon my demise, after I have passed away the special needs/ supplemental needs trust would be funded with assets after my death. Obviously you would need a trustee named to manage those assets, the trustee would be the person you appoint to manage the trust for the disabled person.
Those are basically the two ways that the trusts are setup and funded. It could be funded during someone’s lifetime, or it could be funded at death to leave an inheritance for somebody who has special needs or disabilities.
Who Is actually able To create A first party Special Needs Trust?
The first party trusts are a bit different. Those are generally set up by the individual themselves that is disabled and not a third party. Meaning that an individual that has disabilities and now is coming into some money usually from a personal injury award or an inheritance is the one setting up the trust for their own benefit, and depending on their disability, if they have capacity, they may be able to set that up with an established trust that has been put in place already by a not-for-profit. Or if they lack capacity, they can be established by that disabled person’s parent, guardian, or grandparent with a Court Order. Generally those applications must be made to a Court by the disabled person’s guardian, parent, or grandparent, if you are not using an established trust company that has already been put in place by a not-for-profit.
For example, if a personal injury award or inheritance came to a person who was suffering from disabilities, obviously they would need to have those funds put into the supplemental needs trust, so that they would not get knocked off of Medicaid and or lose their disability government payments.
There would be a need for an application to be made to a court and you would need a Court Order in order to set up that first party trust to allow it to be funded by that personal injury award or inheritance.
What Happens If The Special Needs Person Passes Away Before Funds Are Fully Depleted?
If it is a third party trust, there would be a remainder on the trust, which means there could be a person named to inherit if that disabled person passed away with funds remaining in the trust. It allows for that in a third party trust. There is no need to have a payback to the Medicaid program or HRA for funds that were expended during that disabled person’s lifetime.
Whereas a first party trust does not work that way, and unfortunately, Medicaid has to be paid back from any funds that are left over after a disabled person passes away. Then if there are any monies that are left over after the payback to Medicaid, then it could be made payable to the disabled person’s estate after death. That is a big difference between a first party and a third party trust SNT.
For more information on Special Needs Trust, a free initial consultation is your next best step. Get the information and legal answers you are seeking by calling (718) 475-9639 today.