If you have a child or other relative living with a disability, setting up a Special Needs Trust (SNT)is the solution to provide for her or his care after you have died or become incapacitated.  . Trusts are the most important tool for those who may be unable to care for their personal needs or manage their financial affairs and may not be able to live independently.

The major benefit of Special Needs Trusts is that it ensures that an individual with a disability remains eligible for government benefits. When a person with a disability applies for government assistance such as Supplemental Security Income (SSI) and Medicaid, which are “means tested” programs, assets owned by that person can result in ineligibility, but assets placed in a special needs trust will not be considered owned by the person who is disabled, thus preserving benefit eligibility. This is because the SNT, rather than the beneficiary, owns the assets.  Note that Social Security Disability benefits(SSD)  are not “means tested” so there is no asset test and the individual can receive SSD benefits as long as she or he meets SSD eligibility tests The attorneys at Pierro, Connor, & Strauss LLC are highly experienced in designing Special Needs Trusts.

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Types of Special Needs Trusts

There are two main types of SNT, depending on whose assets are used to fund the SNT: “First Party” (also known as a “Self-Settled” trust) and “Third Party” trusts. While both protect assets and eligibility, there are significant differences.

A First Party SNT can be established for the benefit of a person under the age of 65 by that person or by her or his parent, grandparent, guardian or court order and is funded with assets belonging to the person who is disabled.  In contrast, a Third Party SNT is established and funded by some other person, most often by a parent, either during the parent’s lifetime or upon the death of the parent.  There are other significant differences, including the requirement that assets in the First Party trust on hand when the beneficiary dies must be “paid back” to the local Medicaid agency. In that instance, the agency is reimbursed for benefits paid for the beneficiary who is disabled before the beneficiary’s heirs can inherit.

In addition to the First Party and Third Party trusts, there is a third type of SNT, known as a Pooled Trust.  It is established and administered by a nonprofit organization to receive and manage income of a person with a disability that exceeds the amount that a Medicaid beneficiary may retain. That “excess income” is theoretically required to be contributed to the beneficiary’s cost of care but can be protected by transferring it to the pooled trust.  Such income can be used by the trustees of the pooled trust to pay for the beneficiary’s expenses not covered by Medicaid, thus avoiding the “spend down.”

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To determine which trust might be best, reach out to our special needs planning attorneys today. From our offices in Albany, the Capital Region, New York City, and surrounding areas our trust lawyers are knowledgeable and experienced in the complexities of SNTs.

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