White Plains Special Needs Planning Lawyer

A Special or Supplemental Needs Trust is a legal arrangement, through the direction and oversight of a trustee, that allows a person with special needs to receive and enjoy the benefit of gifts, inheritances, lawsuit awards and settlements, and other income or assets without affecting their eligibility for important government benefits. There are two common types of these trusts- a Supplemental Needs Trust is usually funded by a third party while a Special Needs Trust is funded by the assets of the disabled person themselves, as further explained below.

Eligibility for Medicaid, Medicare, Social Security, Supplemental Security Income (SSI), and other disability benefit programs like these often depends on a mentally and/or physically disabled person’s lack of financial resources, assets and income. When a person with special needs directly receives financial resources that would push them above certain asset and income limits, they can be barred from receiving public assistance benefits or removed from a program for which they previously qualified.

You can help your loved one avoid these outcomes by establishing a Special or Supplemental Needs Trust, which can allow them to experience an enhanced quality of life and pay for expenses they may not otherwise be able to afford while solely relying on government benefits and programs.

What Can a Special or Supplemental Needs Trust Provide?

A Special Needs Trust can provide financial resources for the following and more:

• Caregivers (if not funded by a public assistance program)
• Education
• Entertainment (movies, conventions, sports, activities, etc.)
• Goods and Services for Personal Enjoyment
• Legal Expenses
• Health Aids
• Specially Equipped Vehicles
• Medical and Dental Expenses (if not covered by benefits)
• Insurance
• Living Expenses (subject to certain limitations)
• Travel and Vacations

How Does a Special or Supplemental Needs Trust Work?

Although your loved one can benefit from money in a Special or Supplemental Needs Trust to afford a variety of things, they do not have direct access to these funds. This is because such access would jeopardize their eligibility for disability benefits and other benefits and programs.

Instead, a trustee is tasked with managing the assets in a Special or Supplemental Needs Trust, which includes making disbursements and also keeping records and providing accountings of how funds have been spent, as may be required. If the individual with special needs requires a product or service, the trustee may make a disbursement on the individual’s behalf to a third party that provides the product or service.

If you would like to learn more about how a Special or Supplemental Needs Trust works, don’t hesitate to contact Natasha Meruelo, Attorney at Law and learn more from our special needs planning lawyer in White Plains.

Structuring a Special or Supplemental Needs Trust

There are two kinds of trusts: Special Needs Trust (First-Party Trusts) and Supplemental Needs Trust (Third-Party Trusts).

A First-Party Special Needs Trust is funded with assets and income directly belonging to the disabled person. If this individual had a savings or brokerage account before becoming disabled, for example, this property may be able to be used to initially fund the Special Needs Trust. Other examples of the types of assets or funds that could be put into a Supplemental Needs Trust are inheritance, lawsuit proceeds or other funds/assets that the disabled person may come into.

The beneficiary of this type of trust must be younger than 65 years old at the time the assets are transferred to the trust, the beneficiary must be disabled as that term is defined in the Social Security law, the trust must be created by a parent, grandparent, legal guardian, or pursuant to a court order.

First-Party Special Needs Trusts are subject to a mechanism referred to as a “payback” provision. This provision requires that at the time of the beneficiary’s death, any money remaining in the trust is used to pay back the government for the any medical assistance provided during the course of the beneficiary's lifetime, through various government programs .

Third-Party Supplemental Needs Trusts work differently. Most importantly, the source of the property to fund this type of trust is that of a third party that never belonged to the beneficiary. Because third Party Supplemental Needs Trusts are designed to hold the property of someone other than the person with the disability, there is often more flexibility and discretion. Furthermore, the requirements regarding the beneficiary of the trust being under age 65, that the individual qualify as disabled under certain standards or that only certain parties can create this trust are not applicable here. A Third Party Supplemental Needs Trust is also not subject to the payback provision and allows the grantor to assign secondary beneficiaries to inherit the trust’s remaining property upon the primary beneficiary’s death.