SUPPLEMENTAL NEEDS TRUSTS (SNTs)
Supplemental Needs Trust: A Supplemental Needs Trust (SNT), also known as a Special Needs Trust, is a type of Trust commonly used to “supplement” care and needs for a beneficiary while receiving means-tested public benefits or entitlements such as Medicaid and Supplemental Security Income (SSI). It can be created by the donor during life or be created as part of a Last Will and Testament or trust. Its purpose is to supplement, not supplant, benefits and entitlements that the beneficiary may be entitled to receive. As long as the statutory requirements to establish an SNT are satisfied, the assets transferred to an SNT will not be treated as an available resource for most public benefit eligibility purposes. Essentially, the money in the SNT becomes invisible to most government benefit programs. The SNT is commonly used in New York for both Medicaid and SSI recipients to pay for extras that Medicaid and SSI do not cover.
There are three common types of SNTs: self-settled or first-party (using the beneficiary's own funds); third- party (using other people’s funds); and pooled trusts (using the beneficiary’s monthly surplus income and or other assets).
A self-settled or first-party SNT is established for a disabled individual/beneficiary under 65 years of age. The Trust is funded with the beneficiary's own funds or entitlements. This type of Trust previously required that it be established (settled) only by a parent, grandparent, legal Guardian, or Court. As of December 13, 2016, a person who is mentally capable is now entitled to establish his/her own self-settled SNT under the Special Needs Trust Fairness Act. This is a huge victory and step forward for mentally capable individuals, and is the result of years of lobbying efforts by special interest groups on behalf of disabled persons. This Trust requires a pay-back provision to Medicaid at the death of the beneficiary from any funds remaining in the SNT upon the death of the beneficiary for all Medicaid benefits paid during the beneficiary's lifetime.
A third-party SNT is established by a Will or Trust for a disabled individual/beneficiary of any age with funds belonging to third parties not legally responsible for the support of the beneficiary. This type of Trust is established by someone other than the beneficiary. There is no pay-back provision to Medicaid at the death of the beneficiary, provided the estate of the beneficiary is not the recipient of the remaining funds. The Trust document can direct the disposition of any remaining funds upon the beneficiary's death. The Trust document may allow the beneficiary or another person to direct the disposition of the funds remaining in the Trust upon the beneficiary's death. The beneficiary's Last Will and Testament, or a Power of Appointment, may alternatively direct the manner in which the remaining funds are distributed.
The SNT can spend the Trust money on anything not covered by the Medicaid or SSI programs to enhance and supplement the beneficiary's life. Common uses may include a home, rent, taxes, utilities, repairs, common charges, apartment maintenance, clothing, food, additional home care services not provided by Medicaid, entertainment, travel, technology, furnishings, an automobile, automobile expenses, insurance, tutoring, companionship, transportation, and other supplemental items. If the SNT beneficiary is on SSI, payment for shelter and most related utilities will reduce the SSI benefit by up to one third. There is no reduction for Medicaid benefits for shelter costs. All payments from the Trust must be for your sole use and benefit; you can not make gifts with Trust assets or income.
Pooled Trust: The Pooled Trust is a first-party SNT available to disabled persons of any age. It is often the best way for elderly recipients of public benefits to avoid losing their “surplus income”, the amount earned by the Medicaid recipient above the Medicaid income limit ($875.00 in 2020 with a $20.00 disregard in New York City), to Medicaid.
There are numerous nonprofit organizations in New York State which have Pooled Trusts. By establishing a Pooled Trust, you create a vehicle for sheltering your surplus income for your use and benefit, often enabling you to remain in the community. The Pooled Trust, once established, allows you to deposit your surplus income into a separate Trust account maintained for you and not have those funds considered available by Medicaid. Your surplus income placed into a Pooled Trust can be used for your needs rather than going to Medicaid as a spend down. Common uses of allowable expenditures include rent, taxes, utilities, repairs, common charges, apartment maintenance, clothing, food, additional home care services not provided by Medicaid, entertainment, travel, technology, furnishings, an automobile, automobile expenses, insurance, tutoring, companionship, transportation, and other supplemental items. If the Pooled Trust beneficiary is on SSI, payment for shelter and most related utilities will reduce the SSI benefit by up to one third. There is no reduction for Medicaid benefits for shelter costs.
There are several aspects to the Pooled Trust you must consider before seeking to establish one. At your death, any remaining funds in your account will most likely go to the nonprofit charity running the Pooled Trust and not to your beneficiaries. There are strict requirements and rules in the setup and approval of the Trust as well as in the payment of the bills. All payments from the Trust must be for your sole use and benefit; you can not make gifts with Trust assets or income. You must submit bills to the Pooled Trust to be paid which must be approved; there can be no request for cash. There are monthly and or annual fees incurred. Use of the Pooled Trust may lengthen the Medicaid approval process as a separate review of the Trust is done by Medicaid. Penalties for transfers to a Pooled Trust for persons over 65 years of age receiving SSI apply.
If you have questions regarding Supplemental Needs Trusts or Pooled Trusts, contact Fern J. Finkel or Julie Stoil Fernandez at Finkel & Fernandez, LLP 16 Court Street, Suite 1007, Brooklyn, New York 11241, 347-296-8200 (telephone), 718-965-3185 (fax), firstname.lastname@example.org, email@example.com.
*Disclaimer: The information contained on this website is provided only as general information and is not intended as legal advice, nor should it be used as a substitute for a complete review of your case by an experienced elder law attorney. All situations differ. By visiting this website, there is no attorney-client relationship established between you and Fern J. Finkel, Julie Stoil Fernandez, or Finkel & Fernandez, LLP.