New York City Special Needs Trust Lawyer
If you have a child, grandchild, sibling or even a parent who has a disability, you are naturally concerned about their care now and for the rest of that person's life. You want to make sure that your disabled loved one has the resources to receive the proper care and enjoy a comfortable life. Meeting the needs of a person with special needs can be quite expensive. Governmental programs such as Medicaid do provide benefits for the care of people with special needs. However, in order to qualify for such benefits, in addition to having a special need, the person must also have limited resources. If you leave your loved one a substantial gift in your will or even a gift while you are still living, there is a chance that your loved one would lose eligibility for benefits from the government. However, with careful planning, you can provide for your loved one with special needs without jeopardizing governmental benefit eligibility. There is a specific estate planning tool called a special needs trust (SNT) that is designed to benefit 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, in contrast with other types of trusts 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 New York City 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 that you will need to ensure the future needs of your loved one with special needs as well as the future needs of you and the rest of your family.
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Care must be taken when setting up a special needs trust to ensure that it complies with federal and state law. It also must be set up properly to ensure that the beneficiary will maintain eligibility for needs-based governmental benefits such as Medicaid and Social Security Income despite the existence of the assets in the special needs trust. There are several types of special needs trusts including self-settled, third-party, and pooled. A special needs trust can be funded in a several different ways. For example, parents and other family members and friends can help fund a special needs trust by naming the trust as a beneficiary of life insurance, IRAs or retirement benefits. Many parents fund special needs trusts by simply making regular gifts to the trust over a number of years. If the beneficiary receives a court settlement, receives an inheritance or receives funds from some other source, then that money can be used to fund the special needs trust.
Because of the unique features of each type of SNT, it is important that you seek guidance from an experience practitioner who will help you determine the best type of SNT for your specific situation.Who should I appoint as trustee?
When establishing a special needs trust, you must designate a trustee. Typically, parents will serve as the trustees, with successors trustee named in the event of the death of the parents. Successors are often other family members or close friends. A corporate trustee can also be named. However, corporate trustees are expensive and only manage trusts with significant assets. The trustee is responsible for managing the trust assets, including investing the assets and determining what expenditures should be made from the trust assets. Care must be taken in selecting the trustee for a special needs trust. While it is important for the trustee to care about the beneficiary, it is also important that the trustee be fiscally responsible and understand the rules related to SSI and Medicaid.
- Willingness and Ability to Serve. The trustee must be willing and able to serve as trustee. The job of a trustee can requires a significant amount of detailed work. While you may feel that someone would be honored to serve as trustee, it is possible that due to time constraints some may simply not be able or willing to serve. Thus, it is important to discuss the role before nominating someone as the trustee. You do not want to name someone who then refuses to serve.
- Good Relationship with the Beneficiary. While the trustee does not necessarily need to have a close personal relationship with the beneficiary, it is a good idea to make sure the trustee has a good understanding of the beneficiary's condition, abilities and needs. The trustee also should have the patience and empathy to interact with the beneficiary in an appropriate manner.
- Strong Financial Background. The trustee of a special needs trust should have a proven track record of financial competence. After all, the trustee will have sole responsibility for a significant sum of money that is critical to pay the expenses of a disabled person. Part of the job of the will also include filing returns, maintaining accurate financial records, issuing reports, and making wise investments.
- Familiarity with Medicaid and SSI. While it is not necessary for the trustee to be familiar with the rules related to Medicaid and SSI, the trustee must be willing to learn those rules and get outside help with understanding the rules if necessary. If the trustee manages the trust in a manner that is inconsistent with the requirements of Medicaid and SSI, he or she may jeopardize both the eligibility of the beneficiary for governmental benefits and the financial status of the trust.
- Co-Trustees. In some circumstances naming co-trustees may be a good idea. For example, naming a couple as co-trustees, or siblings as co-trustees will allow the duties to be shared by two people.
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:
- Annual independent medical check-ups
- Transportation and vehicle maintenance
- Essential dietary needs
- Hobbies and recreational activities
- Assistive technology
- Trips or vacations
- Live entertainment
- Athletic equipment, training or competitions
- Education such as vocational training
- Personal care attendant or escort
Care should be taken in using special needs trust fund assets to make purchase of everyday living items such as groceries, restaurant meals, mortgage or rent payments, homeowner's insurance, property taxes and utilities, since these are the types of expenses that SSI is intended to pay for. Paying such expenses from the trust may cause a reduction in SSI benefits. In addition, even if the funds are used for eligible expenses, the cash should not be given to the beneficiary from the trust fund. Instead, the vendor should be paid directly.Who can benefit from a SNT?
While special needs trusts are often established by parents for children with disabilities. For example, if your 2-year-old is diagnosed with autism, you may want to consider setting up a special needs trust for your child and begin to fund it. However, a SNT 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, a serious brain injury, or some 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 is 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
In addition to setting up a special needs trust for your loved one with a disability, there are other estate planning issues to consider in order to make sure that you do not inadvertently risk your loved one's eligibility for government benefits.
Beneficiary Designations. For beneficiaries who receive need-based government benefits, you must take care to make sure to minimize the amount of assets that they own. Make sure that if you or family and friends would like to leave that person money through a life insurance policy or on a retirement plan, that instead of naming your disabled loved one that instead the name loved one's trust is named as the entity designated to receive the funds. Otherwise, such a designation could cause your loved one to lose access to valuable government benefits.
Last Will and Testament. A will allows you to set forth how you would like your assets distributed after you pass away. Without a will your assets will be distributed to your heirs according to New York's laws of intestate succession. If you would like to leave assets to a loved one who has disabilities, then it is important to make sure that your estate does not fall into intestacy for 2 main reasons. First, because intestate succession will require that your estate be distributed to your statutory heirs in a specified order of priority, if your loved one is not your spouse or child, then he or she may not receive anything from your estate. Second, even if he does receive an inheritance, it will go directly to him, increasing his assets. As a result, he may lose government benefits.
A special needs trust may be just one of several documents in your special needs estate plan strategy necessary to provide for your loved one who has special needs. For your SNT to be effective it is essential that it is designed according to legal requirements and that its trustee understands how it must be managed. To ensure that your SNT, will, and other estate planning documents are properly drafted and executed, it is important for you to have experienced representation. The staff at Stephen Bilkis & Associates, PLLC will help you develop an overall estate plan that reflects your individual goals. Contact us at 1.800.NY.NY.LAW (1.800.696.9529) to schedule a free, no obligation consultation regarding your estate plan. We serve individuals throughout the following locations: