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Supplemental Needs Trusts: Planning for the Disabled

In New York State, two types of Supplemental Needs Trusts (“SNT”) exist, both of which insulate assets of the trust Beneficiary while allowing that Beneficiary to access government assistance. Utilizing such an estate planning vehicle can be vital for many people, particularly those who have become disabled and parents of disabled children. A SNT can, for instance, provide parents with the ability to ensure their children will be financially secure after they pass away. In many cases, family members will create a SNT for a loved one as part of their estate planning as they are interested in leaving a portion of their estate to their relative while not preventing that relative from obtaining government assistance.

In order to qualify as an SNT, many specific provisions need to be included, all of which require that the trust’s principal and interest only be used for the Beneficiary’s needs which would not otherwise be provided by government assistance. This type of SNT is often referred to as a Third Party Supplemental Needs Trust because it is created by one person for the benefit of another. These types of SNTs permit the creator of the trust to name a Successor Beneficiary in the event that funds remain in the trust after the death of the primary Beneficiary. This type of trust does not need to be created to be funded only at the time of the death of the creator, but may be funded during the lifetime of the trust creator which is often done by parents who are eager to establish financial security for their disabled child.

The other type of SNT is referred to as a Self-Settled First Party Supplemental Needs Trust as it is created by an individual for his or her own benefit. Many of the same rules apply as the other form of SNT regarding immediate provisions of the document. One of the primary differences between the Third Party SNT and the Self-Settled First Party SNT is that any remaining funds in the Self-Settled SNT at the time of the death of the Beneficiary are subject to recovery by the government for any government assistance that was provided to the Beneficiary during his or her life. Nonetheless, a Successor Beneficiary may still be named and remaining trust assets may pass to that individual upon the death of that primary Beneficiary.

At Bashian P.C., we assist a wide array of clients in their estate planning needs, including drafting sophisticated trusts, such as SNTs. In the event that you would like further information regarding SNTs or other trust vehicles, please contact one of our attorneys who will be glad to assist you.


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