Supplemental Needs Trusts In New York Law

According to the Centers for Disease Control, almost 20 percent of the U.S. population is disabled. The percentage generally increases with age, with roughly 36 percent of those over the age of 65 being registered as having at least one disability. If that disability is cognitive, caring for a family member in Westchester County can be a difficult challenge, especially if the cognitive problems have come later in life. A New York supplemental needs trust (SNT) may be a useful tool for you and your family to ensure your disabled loved one is provided for in your estate – without jeopardizing any government benefits to which they may be entitled.

Supplements – Not Replaces – SSI

In New York, a SNT is usually created by the execution of a will, so that the trust will come into being upon the passing of the settlor (the one who created the trust). Its purpose is to create a financial situation in which the needs of a disabled person are provided for without running afoul of federal disability law.

If a person qualifies for Supplemental Security Income (SSI), they must abide by the program’s rules, which includes never possessing more than $2,000 in assets at any given moment. If a person is found to possess assets totaling over that amount, they automatically lose their SSI and their healthcare (usually provided by Medicaid). In order to avoid this, a SNT does not outright give assets to the disabled person; rather, the trust allows the disabled person to benefit from the proceeds of the trust, instead of owning the assets outright.

First vs Third Party SNTs

There are two types of SNTs under New York law. If you decide to create a SNT in Mahopac or Pleasantville for a disabled family member, it will generally be a third-party SNT, meaning that the assets used to fund the trust will be yours. It is possible to have a first-party SNT, which can be created when the disabled person themselves will come into a large amount of money or another asset that would jeopardize their benefits – for example, a legal settlement or inheritance.

A third-party SNT must be established in the same manner as any other trust in New York, with a few required additions – for example, the trust must be irrevocable, otherwise the Social Security Administration (SSA) may count its income against the beneficiary. In theory, one can create a third-party SNT for anyone, though the most common scenario is parents or grandparents establishing one for the benefit of a disabled child or grandchild. It can be a crucial part of estate planning, particularly if one has no other children – ensuring that a loved one is provided for while avoiding doing anything to jeopardize government benefits is a difficult, but not impossible, task.

Contact A Mahopac Estate Planning Attorney

Estate planning can be a difficult and drawn-out endeavor, especially when disability (and disability benefits) are a factor. Calling a Westchester County estate planning attorney from Meyer & Spencer, PC can help to get any questions answered. Contact our office today via our website, or at either of our offices, to schedule a consultation.

Sources:

cdc.gov/ncbddd/disabilityandhealth/infographic-disability-impacts-all.html

census.gov/library/stories/2022/10/do-disabilities-impact-older-peoples-moves-to-other-locations.html

law.justia.com/codes/new-york/2022/ept/article-7/part-1/7-1-12/