How to Create a Special Needs Trust in New York

how to create a special needs trust in new york

Special needs estate planning offers parents an opportunity to prepare for their children’s future. Families that include children with special needs must exercise extra care when creating their estate plans. Whether their special needs child is an adult or a minor, taking the time to prepare for the future will benefit all involved. The goal of special needs estate planning is to make sure that the child with special needs receives as many assets as possible when his or her parents pass away

Our New York City Special Needs Estate Planning Attorneys can Help

If you are the parent of a child with special needs, we can help. Our skilled New York special needs estate planning attorneys can help you create a thorough and effective estate plan. Contact our New York City law offices today to schedule your initial consultation and learn how we can help you and your family today. 

Special Needs Trusts or Supplemental Needs Trusts in New York

Many of our clients opt to create a special needs trust, also known as supplemental needs trusts, and for good reason. These types of trusts allow the trustees to manage the trusts’ assets on behalf of the beneficiary. Special needs individuals need to make sure that they retain their public benefits. Many individuals have costly medical expenses and retaining their publicly funded health insurance is important.

The Main Types of Special Needs Trusts in New York

There are three main types of special needs trusts — self-settled trusts, pooled trusts, and third-party trusts. In a self-settled trust, the beneficiary owns the funds within the trust. The funds in the trust typically come from an inheritance or a legal settlement. In a pooled trust, a nonprofit organization manages the assets of the trust on behalf of multiple beneficiaries. Finally, in a third-party trust, the parents or another loved one of an individual creates the trust to provide for an individual with special needs after their deaths.

Special Needs Trusts and Public Benefits 

Should the income level of the special needs individual rise above certain standards, he or she may lose their public health benefits such as Medicaid and Supplemental Security Income (SSI). The funds of a special needs trust or supplemental needs trust is not considered income when it comes to retaining benefits. When a child with special needs turns 18, he or she can continue to retain need-based benefits. At the same time, he or she can use funds from the trust to supplement his or her needs. 

Special Needs Trusts are Important Money Management Tools

Trustees will manage the funds in the trust on behalf of the individual with special needs who is the beneficiary of the trust. Parents who create a trust can tailor the terms of the trust to meet their family’s needs. The creators of the trust can dictate how the beneficiary can use the assets in the trusts. For example, a trust agreement could provide that the beneficiary can only use funds from the trust to pay for certain supplemental needs. Funds from special needs trusts typically cannot be used to pay for any of the following:

  • Groceries
  • Regular restaurant meals
  • Mortgage payments, rent, or property tax
  • Utilities
  • Renter or homeowner insurance
  • A cash allowance is given to the beneficiary directly

Special needs trust funds can be used to pay for supplemental needs, such as:

  • The cost of medical expenses that Medicaid does not cover such as mechanical beds, accessible vans, wheelchairs, and special therapies
  • Cultural and recreational expenses that enrich the beneficiary’s life

Determining which needs are necessities versus supplemental can become challenging. At Law Offices of Barton P. Levine, our skilled estate planning attorneys can help advise you as to how to set up the special needs trust in a way that protects the interests of you and your child.

Our Child Has Special Needs: Do We Need a Special Needs Trust?

Not everyone with a special needs child will benefit from a special needs trust. Special needs trusts are especially necessary when an individual receives Medicaid, Social Security Income or any other government benefit that is based on income. Even if an individual with special needs is not currently receiving benefits, if there is a possibility that he or she might do so in the future, a special needs trust could be beneficial. 

Properly drafted special needs trusts will not disturb an individual’s ability to receive public benefits. In most cases, when a child is not able to work enough to support himself or herself due to a disability, a special needs trust should be part of the estate plan. Clients of all different income levels have benefited from special needs trusts.

Clients sometimes ask us if they can leave assets to the brother or sister of their special needs child. However well-meaning, the brother or sister could face a divorce, bankruptcy, or lawsuit that would endanger the funds intended for the special needs child. Additionally, the brother or sister could die before the sibling with a disability. A special needs trust prevents the assets from becoming unavailable or lost. The funds in the trust will become segregated and irrevocably dedicated to the child with a disability. 

The Law Offices of Barton P. Levine can Help

Setting up a special needs trust is a valuable step you can take in protecting your child with special needs after your death. However, setting up a special needs trust in New York can become complex. Our attorneys consider all of the major factors that go into setting up the most effective trust possible. We will evaluate tax implications, public benefits implications, as well as your overall estate plan. We aim to offer our clients excellent customer service by listening carefully to our clients’ goals and needs. Contact our New York estate planning law firm today.

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