Special Needs Trust Lawyer in New York
If your loved one has a physical, mental, or intellectual disability, then making long-term plans for their future is crucial. While planning for your family’s future can be daunting, it can be even more challenging to imagine how you will continue providing for your loved one with special needs long after you’re gone.
Special needs trusts exist to protect assets that can be used to provide for your loved one with special needs in the event that you pass away, ensuring that even when you are not around, your loved one’s future will be secure. By setting up a special needs trust, you can rest easy knowing that no matter what happens, your loved one will have their basic needs met without harming their government benefits.
Establishing a special needs trust isn’t always a straightforward process, so consulting with a knowledgeable attorney can be beneficial to you and your loved ones. Our dedicated special needs planning attorneys at Chaves Perlowitz Luftig LLP are here to answer any questions you may have about estate planning and will help you navigate the complex process of establishing a special needs trust in order to secure your loved one’s future.
What Is a Special Needs Trust in New York?
A special needs trust, also sometimes referred to as a supplemental needs trust, is an irrevocable trust that can be used to protect assets without negatively impacting your loved one’s ability to claim need-based benefits, such as Supplemental Security Income (SSI) or Medicaid. The general idea is to protect certain assets for your loved one with special needs in a way that does not jeopardize the important public benefits that they receive.
Some families may wonder why they shouldn’t simply give their family member who has a disability money outright or make them an heir in their will. Giving your loved one money could harm their ability to get government benefits. If your loved one refuses the inheritance, their benefits can also be adversely affected. By placing those funds in a special needs trust, the funds are protected, and the beneficiary’s government benefits are not affected.
Special needs trusts are often used to help people with special needs make purchases that are not typically covered by their government benefits. As is the case with all trusts, there is a “trustee,” or a person who manages the trust, and a “beneficiary” who benefits from the trust, your loved one with special needs.
Types of Special Needs Trusts
There are a few different types of special needs trusts that you can establish for your loved one. They include:
First-Party Special Needs Trusts
First-party special needs trusts are irrevocable trusts that are designed to protect the assets of a person with a disability without causing a reduction or discontinuation of their government disability benefits.
First-party needs trusts are frequently established when a person with special needs expects to come into a significant amount of money. This could be funds from a divorce settlement, assets that they inherited from a family member who passed away, or even a settlement that they receive for an accident that left them disabled.
Once the funds come in, they can be set aside into the trust, where they will be protected and where they won’t impact government benefits.
As an example, let’s assume a member of your family becomes permanently disabled due to a devastating car accident. After navigating through the claims process with a personal injury lawyer, they receive a settlement of $90,000. They would then put those funds in the first-party special needs trust to segregate those assets from their other assets so that their ability to get governmental assistance remains the same.
First-party special needs trusts do have a couple of caveats. First, a first-party special needs trust can’t be established for anyone who is older than 65. Second, any funds that are still in the special needs trust when your loved one with a disability passes away must be paid back to Medicaid, so they can recoup the costs of some of the benefits they provided to your loved one during their lifetime. This is why first-party special needs trusts are sometimes known as “payback trusts.”
Third-Party Special Needs Trusts
Third-party special needs trusts are funded differently. While a first-party special needs trust is usually funded by income that the person with special needs themselves is about to receive, a third-party special needs trust is funded by someone else, usually a donor who initially sets up the trust and funds it.
The strings attached to first-party special needs trusts do not apply to third-party special needs trusts. There is no age limit for setting up a third-party special needs trust.
Third-party special needs trusts also do not come with a payback provision. Unlike with first-party special needs trusts, the beneficiary never owned the assets in the first place. Therefore, if the beneficiary passes away and there is $40,000 left in the trust, that money does not have to be paid to the government to reimburse Medicaid.
As an example, if a person with special needs has a parent or grandparent who is drafting their final will and testament, they can instruct their attorney to include a third-party special needs trust to benefit a child or grandchild with special needs after they pass away.
Once the parent or grandparent passes away, the trustee, who manages the trust, is able to provide for the needs of the beneficiary, the child or grandchild with a disability, without impacting their ability to receive government benefits. Once the beneficiary passes away, the trust may instruct that the remaining assets go to another beneficiary.
Pooled Special Needs Trusts
As the name suggests, the assets in pooled special needs trusts are “pooled” together from investments by various families and managed by a non-profit organization. Each person with special needs will have their own account, but the trust is funded by many families as opposed to one. The non-profit organization will select a trustee to represent your loved one.
As is the case with first-party special needs trusts, any funds that remain in the beneficiary’s account after their death must be paid to reimburse Medicaid.
What to Consider When Setting Up a Special Needs Trust in Manhattan
Not every person with a disability needs a special needs trust. But if they collect Medicaid, SSI, or any other need-based government benefits, then it could be beneficial to set up a special needs trust to protect funds that can be used later to provide for your loved one and ensure that there is no disruption of their government benefits.
It is important to carefully consider whether your loved one may at some point receive funds that could jeopardize their public benefits, whether through an inheritance, a life insurance policy, or a personal injury settlement. If your loved one may come into these funds, a special needs trust that is properly set up and funded may be able to safeguard their government benefits while also being able to provide for more of their needs than the benefits alone would cover.
Special needs trusts are irrevocable, so once you transfer property to the trust, you will not be able to get it back out.
To determine how much property your loved one will need, you will need to consider:
- Their age
- Their life expectancy
- The type and value of assets that will be added to the special needs trust
It is also important to appoint a trustee whom you trust who can manage the trust after you pass. The trustee is responsible for completing periodic accountings that show how the trust funds have been used and complying with state law regarding special needs trusts.
How Special Needs Trust Funds Can Be Spent
Money in the trust can be used for expenses such as:
- Any medical expenses not covered by Medicaid or Medicare
- Service animals
- Communication devices such as cell phones
- Laptop computers and televisions
- Auto insurance
- Family trips and other recreational activities
Generally, if the beneficiary receives government benefits, such as SSI, funds from the trust cannot be used for basic living expenses such as:
- Food, including groceries and restaurant meals
- Rent or mortgage payments
- Utility payments
- Homeowner’s insurance
If funds from the trust are used to purchase basic needs and living expenses, they can be considered income, and could affect a person’s ability to collect their full government benefits.
Our Special Needs Trust Attorneys in Manhattan Are by Your Side
At Chaves Perlowitz Luftig LLP, we understand that establishing a special needs trust can be complicated. Our special needs trust lawyers are here to help you and your family review your options, consider how a trust might fit into your overall estate plan, and decide which type of trust might be best for you and your loved one. Contact one of our dedicated supplemental needs trust lawyers in New York today for a confidential consultation.