A special needs trust is established to prevent people from losing benefits from certain government programs after receiving a settlement. An influx of wealth can make one ineligible for benefits from Supplementary Security Income (SSI), Veterans Aid and Attendance, Medicaid, and government housing. A special needs trust supplements but does not replace, these benefits by paying for non-covered services or equipment. Below are the applicable laws to establishing a special needs trust in New York.
Federal Law
U.S. Code Section 1396p.(d)(4)(A).
(4) This subsection shall not apply to any of the following trusts:
(A) A trust containing the assets of an individual under age 65 who is disabled (as defined in section 1382c(a)(3) of this title) and which is established for the benefit of such individual by the individual, a parent, grandparent, legal guardian of the individual, or a court if the State will receive all amounts remaining in the trust upon the death of such individual up to an amount equal to the total medical assistance paid on behalf of the individual under a State plan under this subchapter. Full text
New York Law
2013 New York Consolidated Laws. EPT – Estates, Powers & Trusts Article 7 – TRUSTS
Part 1 – (7-1.1 – 7-1.19) RULES GOVERNING TRUSTS. 7-1.12 – Supplemental needs trusts established for persons with severe and chronic or persistent disabilities.
§ 7-1.12 Supplemental needs trusts established for persons with severe and chronic or persistent disabilities
(b) A supplemental needs trust shall be construed in accordance with the following:
(1) It shall be presumed that the creator of the trust intended that neither principal nor income be used to pay for any expense which would otherwise be paid by government benefits or assistance for which the beneficiary might otherwise be eligible or which the beneficiary might be receiving, notwithstanding any authority the trustee may have to make distributions for food, clothing, shelter or health care as provided in clause (ii) of subparagraph five of paragraph (a) of this section;
(2) Section 7-1.6 of this article shall not be applicable to the extent that the application or possible application of that section would reduce or eliminate the beneficiary’s entitlement to government benefits or assistance;
(3) Neither principal nor income held in trust shall be deemed an available resource to the beneficiary under any program of government benefits or assistance; however, actual distributions from the trust may be considered to be income or resources of the beneficiary to the extent provided by the terms of any such program;
(4) The trustee of the trust shall not be deemed to be holding assets for the benefit of the beneficiary for purposes of section 43.03 of the mental hygiene law or section one hundred four of the social services law . . . NY Est Pow & Trusts L § 7-1.12 (2012).
