Whether you're in Buffalo, Williamsville, or elsewhere in Western New York, understanding the tools and strategies available to New Yorkers in line with both state and federal guidelines is critical to creating a plan that truly works on their behalf when needed and when you can no longer care for them. We wanted to break down special needs planning for you as it’s a question we frequently get and people can often think it has the same principles as any estate plan. But realistically speaking, special needs planning has considerations that regular estate planning does not, including eligibility for government benefits and much more.
What Exactly Is a Special Needs Trust?
A Special Needs Trust (sometimes referred to as an “SNT”) is an estate planning tool designed to manage assets for an individual with disabilities. Specifically, these trusts aim to provide benefits without jeopardizing the individual’s eligibility for government programs like Medicaid or Supplemental Security Income (SSI). By placing assets into a
Special Needs Trust, you can provide for your loved one's supplemental needs beyond what government benefits cover, such as personal care items, education, recreational activities, and more. This blog post is referring to Special Needs Trusts that are set up during life - these are lifetime trusts that provide the best planning when it comes to helping a loved one with special needs.
Types of Special Needs Trusts
- First Party Special Needs Trust: A First Party Special Needs Trust is funded with the special needs child’s own assets or funds. These may come from an inheritance or settlement, as individuals with special needs cannot earn, for example from employment, more than a certain amount without it eliminating their eligibility for government benefits. These trusts must include a Medicaid payback provision, meaning any remaining funds after the beneficiary's passing are used to reimburse Medicaid for services that were provided to them during their life. As well, these trusts require the approval of the local Department of Social Services at their creation so that the appropriate payback provisions are reviewed and deemed accepted.
- Third Party Special Needs Trusts: A Third Party Special Needs Trust is established by someone other than the beneficiary, typically parents or grandparents, using their own assets. These trusts do not require a Medicaid payback provision, allowing any remaining funds to be distributed to other family members or charities as specified. The ability to plan ahead so that there is great flexibility without harming a special needs person’s benefits is a tremendous value that cannot be stated enough!
There are certainly strategies and several considerations as to which of these types of trusts (or both!) make sense for your specific situation, and the situation of your loved one with special needs. However, the specifics of each particular situation will dictate what makes the most sense!
What is so critical is to be prepared and informed about options and then to take action in a proactive manner. Finding yourself in an urgent situation due to an unexpected crisis causes time, energy and money. In the case of a loved one with special needs, this is quite unfortunate and happens due to the lack of proactive planning. The best outcomes stem from a proactive approach.
And, as a reminder, when you set up a lifetime Special Needs Trust, the assets in the trust can be managed by a Trustee with a full set of instructions of what actions should be taken, what distributions can be made, who the successor trustees should be and so on. This permits property to be managed on behalf of the special needs person in a tailored fashion. Adding to it is the component of preserving governmental benefits. If you step back and think about it, this planning is truly game-changing!
Key Considerations in Special Needs Planning
- Letter of Intent: This non-legally binding document provides caregivers and trustees with vital information about your loved one's preferences, medical history, daily routines, and aspirations. It serves as a guide to ensure continuity of care and quality of life. While this isn’t technically a legal document, a thorough letter of intent is so incredibly important for special needs individuals. Caregivers and parents of children with special needs know: schedules, preferences, likes & dislikes, and so much more goes into the care of their special needs loved one. These tiny details are just as important as the financials and legal documents of an estate plan, so we always stress the importance of this letter!
- Guardianship: Deciding who will make legal and medical decisions for your loved one can be a difficult decision, so it’s important to consider well in advance (perhaps even with back up options!). Establishing guardianship ensures that a trusted individual can advocate on their behalf when you're no longer able to do so. Additionally, ensuring that this individual or individuals know what their responsibilities will be in the event of your passing is critical to making this transition smooth for your special needs loved one. Note: There can be either a guardianship of person or a guardianship of property or both, depending on the situation. As one example of possible planning, there could be a guardianship of person to handle personal and medical matters combined with a Third-Party SNT to ensure financial arrangements are in place, all to benefit the special needs loved one. A thorough guardianship proceeding can have back-up individuals ready to handle guardianship duties, if needed, when the primary guardian(s) can no longer act. As well, if the Third-Party SNT is in place, this is an excellent way for other family members to also benefit the special needs loved one. Other family members can incorporate this trust in their own estate plans as the trustee can accept additions to the trust from other family members. Too many families run into problems in this area because they have named the special needs individual as the direct recipient of property, or an inheritance. Instead of having a well-orchestrated plan with great benefits, the trip-ups from the lack of planning or bad planning become a source of great difficulties with various problems.
- Government Benefits: Familiarize yourself with the benefits that your loved one may be on or entitled to, whether it's for current needs or potential long-term needs. This includes programs like SSI and Medicaid. You’ll want to encourage your named guardians to do the same. Proper planning ensures that your loved one remains eligible for these benefits while supplementing their needs through their Special Needs Trust. It is well worth it, in our opinion, to
work with an attorney to review and discuss these government benefits and the various planning opportunities. The awareness and educational aspects of working with an attorney can mean the difference of just taking any kind of action to taking the right kind of action.
Steps to Establishing a Special Needs Trust in New York
- Consult with an Experienced Attorney: Engage a legal professional familiar with New York's specific regulations regarding Special Needs Trusts to ensure the trust is structured correctly.
- Select a Trustee: Choose a trustworthy individual or institution to manage the trust's assets and make distributions in the best interest of the beneficiary.
- Fund the Trust: Determine which assets will be used to fund the trust, ensuring they are titled appropriately to avoid affecting benefit eligibility.
- Coordinate with Overall Estate Plan: Ensure the Special Needs Trust aligns with other estate planning documents in your own plans, such as your wills or powers of attorney. You won’t want anything to contradict something else accidentally, and looking at the whole picture will make sure that nothing gets overlooked.
Planning for a loved one with special needs is the greatest act of love and responsibility that you can bestow upon them. By establishing a well-structured Special Needs Trust and considering the various facets of their care and financial support, you can provide them with a secure and fulfilling future. You can learn more about New York State Special Needs Trusts by contacting us, or the
Special Needs Alliance also has some great info about these types of trusts! Remember, the landscape of special needs planning is intricate, and laws can vary by state. Therefore, seeking guidance from professionals experienced in New York's regulations is essential, and even considering other states and their regulations may need to be considered for future plans.
Here at Ruth P. George Law PLLC, we care about making sure that your special needs estate planning is done the right way, and that it will best serve your special needs child when they need it the most. If you're in Buffalo, Williamsville, or the surrounding areas and need assistance with special needs planning, don't hesitate to
reach out to our office - We are happy to guide you, offer great resources, update your current estate plan or add to it where necessary, and much more.
Please Note: The information provided in this article is for educational purposes and should not be considered legal advice. Please consult with a qualified attorney for advice specific to your family and situation.
