An integral part of our practice involves planning with the assets of individuals who are disabled or have special needs. These individuals are usually persons who have developmental disabilities, mental illnesses, or who suffer from other severe and chronic or persistent disabilities. We commonly refer to these individuals as supplemental needs beneficiaries and the primary planning technique used to protect their assets is a supplemental needs trust (sometimes referred to as a special needs trust). To read more about planning with supplemental needs trust, visit our website.

Often, a supplemental needs beneficiary is receiving government benefits such as Medicaid, supplemental security income (SSI) and social security disability (SDD). Some of these benefits, such as Medicaid and SSI, are means tested programs. That means (no pun intended), that in order to be eligible for these benefits, the government will take into consideration your assets and income. In many cases, a supplemental needs beneficiary has very little in the way of assets and income.

However, there are many scenarios where a supplemental needs beneficiary may receive a windfall increasing their assets to a level that would disqualify them for government benefits. We see this often where there are settlements resulting from infant medical practice cases or injuries sustained as an adult as a result of someone else’s negligence. Another common instance is where a family member such as a parent or grandparent leaves assets to a child or grandchild, who is a known supplemental needs beneficiary, without doing any planning with an elder law attorney. This is unfortunate because planning can be done at the grandparent/parent level to place the assets directly into a supplemental needs trust at death known as a third party supplemental needs trust which will preserve the beneficiary’s government benefits.

If no planning was done and a supplemental needs beneficiary ends up with assets in her name that would otherwise disqualify her for government benefits, current law allows for the transfer of those assets by to a supplemental needs trust. This type of supplemental needs trust is called a first party supplemental needs trust and can only be created with the assets of the supplemental needs beneficiary and so long as the beneficiary is under sixty-five years of age.

Prior to December 13, 2016, a first party supplemental needs trust could only be created by a parent, grandparent, legal guardian or court. If you are paying attention, you realize that an individual, meaning the supplemental needs beneficiary, could not create the trust herself. Clearly where there is a parent or grandparent, there would be no issue. However, there are a plethora of individuals who are disabled, yet have their capacity to sign a trust, but cannot, because they may not have a parent or grandparent.

Consider a disabled adult with autism. Depending on where that person falls on the autism spectrum, she may be perfectly capable of creating a trust to protect her assets. If there is no parent or grandparent, she would have no choice but to hire an attorney to commence a guardianship proceeding seeking Court approval to create and fund the trust. This could be costly and time consuming.

On December 13, 2016, President Obama signed the 21st Century Cures Act (P.L. 114-255) which amended the Federal statutes to broaden the definition of those who can create a first party supplemental needs trust to include an “individual”.

It is important to note that we expect New York to amend its statutes in the next few months to comport with this new federal legislation shortly. Caution should be taken prior to relying solely on the federal statute. We are committed to keeping you abreast of important changes in the law and are available to assist you in navigating them. Please feel free to schedule a consultation by contacting us at 914-222-5740 (Yorktown Heights), 914-206-1418 (Rye) or by e-mail at smd@mfd-law.com. Please also visit our website at www.plantodayfortomorrow.com.

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The information presented at this site should not be construed to be formal legal advice nor the formation of an attorney/client relationship.

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