Estate, Powers and Trusts, § 7-1.12: Supplemental Needs Trust Established for Persons With Severe and Chronic or Persistent Disabilities

All parents are concerned about their children's futures. However, if you have children with special needs you have a particular concern about your children's future and what will happen to them when you are no longer around to take care of them. Fortunately, with careful estate planning using such tools as a special needs trust, you can plan now for the future care of your child or other relative who has a disability or special needs. Under New York Estates, Powers and Trusts section 7-1.12, a special needs trust, also referred to as a supplemental needs trust, is a special type of asset protection trust that is designed specifically to help provide for the needs of people with severe disabilities. While a special needs trust has many features that are similar to other types of trusts, in order for a special needs trust to be effective New York probate law has special requirements. A New York Estate Lawyer will be able to set up the special needs trust for you and also help you set up any other components of your estate plan that will help you ensure the personal and financial well-being of your loved ones.

1. What property may be disposed of by lifetime trust: Estates, Powers and Trusts, section 7-1.15
2. Revocation of lifetime trust by will: Estates, Powers and Trusts, section 7-1.16
3. Execution, amendment and revocation of lifetime trusts: Estates, Powers and Trusts, section 7-1.17
4. Funding of lifetime trust: Estates, Powers and Trusts, section 7-1.18

The purpose of a special needs trust is to distribute assets for the benefit of someone with severe disabilities in such a way that the beneficiary remains eligible for needs-based governmental benefits such as Medicaid and Social Security Income. In order to qualify as a beneficiary of a special needs trust, the person must have a “severe and chronic or persistent disability.” This includes developmental disabilities as well as physical disabilities, mental impairment and mental illness. In addition, the disability must be such that the person will have a long-term need for specialized health, mental health, social or other related services.

A critical feature of a special needs trust is that the trustee is prohibited from spending trust assets in any way that would diminish government benefits for which the beneficiary would otherwise be eligible.

1. Definitions: When used in this section, unless otherwise expressly stated or unless the context otherwise requires:

   1. "Developmental disability" means developmental disability as defined in subdivision twenty-two of section 1.03 of the mental hygiene law.

   2. "Government benefits or assistance" means any program of benefits or assistance which is intended to provide or pay for support, maintenance or health care and which is established or administered, in whole or in part, by any federal, state, county, city or other governmental entity.

   3. "Mental illness" means mental illness as defined in subdivision twenty of section 1.03 of the mental hygiene law.

   4. "Person with a severe and chronic or persistent disability" means a person

      1. with mental illness, developmental disability, or other physical or mental impairment;

      2. 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

      3. who may need to rely on government benefits or assistance.

   5. "Supplemental needs trust" means a discretionary trust established for the benefit of a person with a severe and chronic or persistent disability (the "beneficiary") which conforms to all of the following criteria:

      1. The trust document clearly evidences the creator's intent to supplement, not supplant, impair or diminish, government benefits or assistance for which the beneficiary may otherwise be eligible or which the beneficiary may be receiving, except as provided in clause (ii) of this subparagraph;

      2. The trust document prohibits the trustee from expending or distributing trust assets in any way which may supplant, impair or diminish government benefits or assistance for which the beneficiary may otherwise be eligible or which the beneficiary may be receiving; provided, however, that the trustee may be authorized to make such distributions to third parties to meet the beneficiary's needs for food, clothing, shelter or health care but only if the trustee determines (A) that the beneficiary's basic needs will be better met if such distribution is made, and (B) that it is in the beneficiary's best interests to suffer the consequent effect, if any, on the beneficiary's eligibility for or receipt of government benefits or assistance;

      3. The beneficiary does not have the power to assign, encumber, direct, distribute or authorize distributions from the trust;

      4. If an inter vivos trust, the creator of the trust is a person or entity other than the beneficiary or the beneficiary's spouse; and

A special needs trust may be just one of several tools in your estate plan necessary to provide for your loved one who has special needs. To ensure that your will, trust, and other estate planning documents are properly drafted and executed it is important for you to have experienced representation. The staff at Stephen Bilkis and Associates will help you develop an overall estate plan that reflects your individual goals. Contact us at 800.696.9529 to schedule a free, no obligation consultation regarding your estate issue.