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Bronx Special Needs Trust

Families with loved ones who have special needs are constantly concerned about ensuring that their special needs loved one will be able to enjoy a comfortable quality of life. One way to ensure that your relative with special needs will have access to resources to help make sure that he (or she) has the products and services necessary to enjoy life is to create a special needs trust (SNT) for his or her benefit. In New York a special needs trust is called a supplemental needs trust. A supplemental needs trust is a trust established for the benefit of a person with a severe and chronic or persistent disability. NY EPTL § 7-1.12. To qualify as a SNT the trust must be set up with the clear intent that it is not to be used to supplant, impair or diminish government benefits that the beneficiary is currently receiving or government benefits for which the beneficiary might otherwise qualify. The trust funds are typically used to improve the quality of the beneficiary’s life. Thus it is critical that a SNT be funded and administered in such a way that the beneficiary does not lose eligibility for government benefits. A Bronx special needs trust lawyer will educate you on the requirements of a SNT and make sure that your SNT is properly set up. A SNT may be but one estate planning strategy that you will need to ensure the future needs of your loved one with special needs will be cared for.

Types of special needs trusts

There are different types of special needs trusts. They can be categorized based on who sets up and funds the trust, and how the funds are managed. There are also multiple ways to fund a special needs trust. Typically funds for a SNT are funded from an inheritance, by a personal injury award or settlement, or by income earned by the beneficiary. If you or your special needs loved one inherits a significant amount of money, wins a settlement, or receives income from some other source, seek the advice of an experienced special needs trust attorney in the Bronx for guidance on how to manage the income and how to move into a special needs trust in way that will not impact eligibility for needs-based benefits.

Third-party special needs trust. A third-party SNT is one that is set up by someone other than the beneficiary with money not belonging to the beneficiary. It is the most common type of SNT. A third-party trust is popular because unlike a first-party trust, upon the death of the beneficiary the funds that remain in the trust do not have to be paid to Medicaid to cover the amount of Medicaid benefits the beneficiary received. Instead, the person who created the third-party SNT chooses the beneficiaries for the trust remainder.

A third-party SNT can be set up and funded through your will, through life insurance, through retirement benefits, or through some other type of beneficiary designation. As an experienced Bronx special needs trust lawyer will explain, for the trust to be a third-party SNT, the property cannot be left directly to the beneficiary and then transferred to the trust. The trust itself must be the beneficiary. For example, if the name of your special needs child is Sarah Jones, instead of putting "Sarah Jones" as the beneficiary of your life insurance policy, you would put the "Sarah Jones Special Needs Trust." In doing so Sarah's individual wealth will not increase, putting her at risk of losing government benefits.

Self-settled special needs trust. A self-settled SNT, also referred to as a first-party special needs trust, is funded using the assets of the beneficiary. For example, if someone left funds to the beneficiary in a will and the funds were then used to set up a SNT, that trust would be classified as a self-settled trust. The most common source of funds for self-settled special needs trust is proceeds from a lawsuit. In some cases the lawsuit is over the injury that resulted in the disability, but not always. A disadvantage of a self-settled SNT and the feature that distinguishes it from a third-party trust is upon the death of the beneficiary any assets that remain in the trust must be used to repay to New York's Medicaid program the amount of funds paid by Medicaid to the beneficiary.

Pooled special needs trust. A pooled SNT is similar to a self-settled special needs trust in that it is funded by the assets of the beneficiaries. However, it is different from a self-settled SNT in that a pooled special needs trust is created for the benefit of more than one beneficiary. Pooled trusts are generally established and managed by nonprofit organizations. The assets from more than one beneficiary are pooled together for administrative and investment purposes, but the nonprofit organization manages sub accounts for each beneficiary. In addition, even though the beneficiary's own funds may be used to establish the trust, at the beneficiary's death New York State does not require that the remaining funds be repaid for its Medicaid expenses on the deceased beneficiary's behalf as long as the funds are retained in the trust for the benefit of other disabled beneficiaries. For a list of existing pooled special needs trusts in New York, contact a Bronx special needs trust lawyer.

Selecting a trustee

When establishing a special needs trust, you must designate a trustee. Typically the parents of the beneficiary serve as trustee, but that is not a requirement. The trustee needs to be someone who is willing to serve and has the necessary time and skillset.

Make sure that the trustee is willing to serve. Discuss with the trustee the job requirements. While the person you want to serve as trustee may care about the beneficiary, the person may not feel that he (or she) has the time of skill set for the job. The trustee should have a good relationship with the beneficiary. To be effective, the trustee would need to understand the beneficiary’s conditions, needs, and preferences. Because the role would involve some financial work such as filing tax returns, maintaining accurate financial records, issuing reports, and making wise investments, it would be good idea to select someone with a strong financial background, or someone who is comfortable working with financial information.

One of the primary responsibilities of the trustee is to make sure the trust remains in compliance with federal and state law so that the beneficiary does not lose needs-based benefit eligibility. It is important that trustee have a general understanding of the rules related to Medicaid and SSI, and that he be willing to get outside help with understanding the rules if necessary.

Eligible expenses

Assets in a special needs trust are to be used to pay expenses that will improve or enrich the quality of life for the beneficiary. Examples of eligible expenses include:

  • Eyeglasses
  • Entertainment such as videos, games
  • Annual independent medical check-ups. If the beneficiary of the special needs trust receives Medicaid, then Medicaid will cover many of his or her medical costs. For medical care that is not covered by Medicare, trust funds can be used to pay for these expenses. Such costs may include doctor's visits, dental care, eye exams, and hearing exams.
  • Transportation, including vehicle purchased and title to the beneficiary
  • Maintenance of vehicles
  • Insurance including payment of premiums, but not homeowner's insurance
  • Rehabilitation
  • Essential dietary needs, but not standard, everyday groceries
  • Hobbies and recreational activities
  • Assistive technology such as computer or electronic equipment
  • Trips or vacations
  • Live entertainment such as movie tickets, sporting event ticks or concert tickets
  • Athletic equipment, training or competitions
  • Education such as vocational training and educational expenses such as tuition, books, supplies, computer and software, and training in their use.
  • Personal care attendant or escort, as well as a cleaning service
  • Pre-paid funeral and burial plan expenses. Pre-paid funeral expenses can be paid from the trust. However, money from the trust cannot be used to pay for funeral expenses once the beneficiary dies.
Beneficiaries of special need trusts

While special needs trusts are often established by parents for children with disabilities, they can also be set up for the benefit of anyone who has a special need and requires resources for their long-term care including adults. For example, some spouses or children set up special needs trusts for a spouse or parent who has Alzheimer's disease, dementia, or other degenerative ailment or disability. In order to eligible to be a beneficiary of a SNT, the person:

  • Must have a severe and chronic disability such as a developmental disability, mental illness, or other physical or mental impairment
  • Must have a disability that must be expected to or give rise to a long-term need for specialized social or related services.
  • May need to rely on government benefits or assistance
Contact the Law Offices of Stephen Bilkis & Associates

A special needs trust may be just one of several strategies in your special needs estate plan designed to provide for your loved one who has special needs. For your special needs trust to be effective it is essential that it is compliant with the legal requirements and that its trustee understands how it must be managed. To ensure that your special needs trust, will, and other estate documents are properly drafted and executed, it is important for you to seek advice from an experienced special needs trust attorney in the Bronx. The staff at the Law Offices of Stephen Bilkis & Associates will help you set up a special needs trust as well as other documents to ensure that the needs of your special needs loved one are cared for. Contact us at 800-696-9529 to schedule a free, no obligation consultation regarding your case. We represent clients in the following locations: Bronx, Staten Island, Queens, Nassau County, Brooklyn, Long Island, Manhattan, Suffolk County, and Westchester County.

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