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A New York Supplemental Needs Trust Must Be Clearly Stated In Estate Planning Documents

A Supplemental Needs Trust (SNT) is an important mechanism to provide financial security for persons with disabilities. The New York Probate Lawyer Blog has posted a number of articles regarding the requirements and benefits of a SNT.

Essentially, a SNT allows for funds to be held for the benefit of a person who is receiving government benefits such as Medicaid or Social Security Disability. Since the trust beneficiary can only receive benefits from the trust at the full discretion of the Trustee, the creation and existence of the trust will not diminish or effect the benefits the beneficiary receives from governmental sources. Also, there are guidelines that the Trustee must follow in making distributions from the SNT.Estates, Powers and Trusts Law (EPTL) Section 7-1.12 entitled “Supplemental needs trusts established for persons with severe and chronic or persistent disabilities” sets forth the requirements regarding the creation and terms of a SNT. The statute actually provides suggested language for the SNT. It is important that the trust language make clear that the trust assets are not to be used to pay for any benefits that are being paid for through governmental programs. SNT assets are only to be used for extra care or items over and above the things that Medicaid or SSD may be paying for.

A SNT can be created as a testamentary provision in a Last Will or as a separate currently created trust. It is essential that when a person is attempting to craft and create a SNT, the language of the proposed SNT clearly reflect the intention to have the trust meet SNT requirements and function as a SNT. If the language of the creating document does not properly reflect such intent or contain the statutorily required form, the trust may not be protected from being considered as an asset of the beneficiary. As a result, the beneficiary may lose his governmental benefits or the trust assets may be subject to a claim by the governmental authority.

The above dilemma was recently the subject of a decision by Manhattan Surrogate Rita Mella on January 14, 2016. In Matter of Eddey, the executor of a Will asked the Court to reform the Will so that certain Will language would create a SNT for a disabled beneficiary. After reviewing the law in this area the Surrogate noted that the Courts would reform Will language where a testator clearly indicated an intent to have the trust funds supplement rather than be a substitute for government benefits. However, in Eddey the Court held that the decedent’s Will failed to indicate that the assets bequeathed to the disabled beneficiary were to be provided for his extra needs over and above those that might be paid for by the government payments. Thus, the Court declined to rewrite or reform the Will to give the language SNT status.

As can be seen from Eddey, it is imperative to discuss Will and estate planning provisions such as the creation of a SNT with a New York Estate Lawyer. I have assisted many clients with creating a SNT and preparing an estate plan that reflects their intention. Estate Settlement can be complicated where the terms of a Will or Trust are unclear or ambiguous. Many times confusing documents result in Estate Litigation that requires the Court to determine the manner in which estate assets are to be disposed of. If you have any questions regarding estate planning or estate administration call me now to discuss your issue.

New York Estate Attorney Jules Martin Haas, Esq. has been representing clients in New York Estate Proceedings and Estate Planning matters, throughout the past 30 years in New York, including Queens and Nassau Counties. If you or someone you know is involved with or has questions about a New York estate or SNT, please contact me at (212) 355-2575 or email: jules.haas@verizon.net, for an initial consultation.

Jules Martin Haas provides his clients and members of the community with a free monthly e-newsletter which contains articles covering a variety of legal topics including estate planning, financial matters and real estate. If you wish to be placed on the e-newslist, simply e-mail me at jules.haas@verizon.net. You can cancel receiving the newsletter at anytime.

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