Planning
for the Disabled Child with a Supplemental Needs Trust
Since 1993 it has been public policy in New York State to allow parents (or other relatives) of a disabled child to set up a trust for their inheritance which will not disqualify them from government benefits, such as Social Security and Medicaid. The reasoning behind these supplemental needs trusts is simple — prior to the protection now afforded by these trusts, parents would simply disinherit their disabled children rather than see them lose their benefits. Since the state wasn’t getting the inheritance monies anyway, why not allow it to go to the disabled child for his or her extra needs, above and beyond what the state supplies, such as sundries, clothing, meals, vacations, over-the-counter medicines, upgraded medical procedures, reading material, recreation, improved housing, etc.
These trusts, however, offer traps for the unwary. Since payments to
the child will generally reduce their SSI payments dollar for dollar,
trustees of such trusts should be advised to make payments directly
to the providers of goods and services. Preserving SSI benefits is crucial
since eligibility for SSI determines eligibility for Medicaid. In other
words, if SSI is lost the recipient also loses their Medicaid benefits.
In addition, any benefits previously paid by Medicaid may be recovered.
As such, one also has to be mindful of bequests from well-meaning grandparents.
Distributions from the trust to the beneficiary should be “in kind” rather than in cash. For example, the trust may own items such as furniture and allow the beneficiary child the use of them. In addition, the supplemental needs trust must be carefully drafted sothat it only allows payments for any benefits over and above what the government provides, not only now but also in the future. The child may not control or have direct access to any portion of the trust.
A major issue for parents today is the increased life expectancy of their disabled child. With major advances in medical care, many disabled children, who would have previously died before their parents, are now surviving them. In order to solve this problem, parents often make the planning error of leaving a disproportionate share of the estate to the disabled child. This can engender hard feelings in siblings who, although agreeable to such an arrangement initially, may find themselves in need of funds later on and resentful of the uneven distribution in favor of the disabled child. The surviving siblings are often the only support network available for the special needs child so that it is all the more important to keep peace and harmony in the family.
Disclaimer — This web site is intended, but not promised or guaranteed, to be correct, complete or up-to-date. It is not intended to be a source of legal advice; thus the reader should seek out specific advice, based on the reader's age, assets, state of health, etc. from competent counsel. Ettinger Law Firm does not intend links on this web site to be referrals or endorsements of the linked entities.