A Special Needs Trust (also known as the Supplemental Needs Trust or SNT) shields a disabled person’s assets from Medicaid. A Special Needs Trust is paramount to protecting assets from being counted for the purposes of Medicaid, SSI, vocational rehabilitation, subsidized housing, and other benefits based upon financial need.
Supplemental Needs Trusts are authorized by New York State and Federal Law. The Omnibus Budget Reconciliation Act passed by Congress in 1993 specifically authorized the use of Supplemental Needs Trusts for the benefit of individuals who are under the age of 65 years and disabled according to Social Security standards. The Social Security Operations Manual (POMS) authorizes Supplemental Needs Trusts for non-countable assets.
A Supplemental Needs Trust (SNT) can only be established for an individual who is (a) disabled and (b) under the age of 65. It can be used to pay for expenses that Medicaid does not cover, such as certain home care services, travel, entertainment, automobiles, a house, technology, furnishings, and other necessary of luxury items.
There are two kinds of Special Needs Trusts:
Third-Party Special Needs Trust – funded with the funds of a third party, such as a parent or a grandparent. It does not require a Medicaid payback provision.
Self-Settled Special Needs Trust – funded with the disabled person’s own assets. Such a trust can only be established by a court. It requires a Medicaid payback provision.
The great thing about the Special Needs Trust is that unlike the Medicaid Trust, there will not be an ineligibility period, and Medicaid will not be able to consider the SNT when determining eligibility.
Being a trust, the Special Needs Trust provides additional benefits, including keeping the money in the blood-related family, protecting money from a divorce, and saving on estate taxes. For that reason, a Special Needs Trust is a preferred way of leaving an inheritance to a disabled child – the last thing you want is for the child to loose government benefits.
Because a Special Needs Trust is not revocable, assets in such trusts are not easily reachable by future creditors of the beneficiary, and are hard for the courts to reach if there is ever a judgment against the disabled beneficiary
Assets contributed to a third-party special needs trust are not subject to repayment to the government. Only assets that at some point belonged to the disabled person can be taken back by Medicaid, and even that occurs only after the death of the disabled individual and can often be settled.
Call the Law Offices of Albert Goodwin at (212) 233-1233 and schedule a consultation to discuss if a Special Needs Trust is right for your situation.