Education Center

Supplemental Needs Trust

This is an important legal planning tool for disabled individuals called a Supplemental Needs Trust or Special Needs Trust ("SNT"). An SNT allows a disabled individual to maintain or obtain public benefits such as Medicaid or Supplemental Security Income ("SSI"), while the SNT funds are used to improve the beneficiary's life. An SNT provides for needs not satisfied through government by supplementing them. Generally, government entitlements cover such basic needs as food, clothing, shelter and health care. An SNT may provide items such as private caregivers, social workers, legal counsel, aides, housekeepers, accounting professionals, therapists, vacations, modes of transportation, educational programs and vocational training.

There are different types of SNTs. However, all SNTs state the creator's clear intent to improve the quality of life of disabled individuals by providing supplemental support. Any SNT created and funded by an individual other than the disabled beneficiary is called a third-party SNT. It can be inter vivosor testamentary. There is no "payback" to the state in a third-party SNT upon the beneficiary's death, nor is it subject to a Medicaid lien. The creator of a third-party trust can direct who inherits remaining funds upon the trust beneficiary's death. The individual's own assets must not be used to fund a third-party SNT to avoid recoupment by Medicaid at death.

The funds of a disabled individual under the age of 65 may be used to establish a self-settled SNT for his or her own benefit. For example, funds obtained from an inheritance, medical malpractice or personal injury award or settlement may be used to fund a self-settled SNT. Indeed, a disabled plaintiff with extraordinary medical expenses may reap nominal, if any, benefits from a settlement if the money is used for services already provided by public benefits. It is essential to note that, although funded with the beneficiary's assets, the self-settled trust must be created by a parent, grandparent, legal guardian or court order.

Self-settled SNTs contain "payback" provisions to protect the state's right to reimbursement for medical assistance paid for the individual.
Medicaid liens must first be satisfied before funds from a personal injury settlement can be transferred to an SNT. Therefore, the accuracy of liens must be verified and reductions negotiated prior to establishing an SNT.

Disabled individuals who are 65 or older may wish to transfer their funds to a pooled SNT, which is established and administered by a not-for-profit organization on behalf of disabled individuals. Individual accounts are created for each beneficiary. Penalties may apply for transferring assets if government benefits are sought. Further, upon a beneficiary's death, the pooled SNT generally keeps all or a portion of the remaining funds for the benefit of the other beneficiaries.

The lives of the disabled will be greatly improved by using SNTs to provide for special needs not already covered by government benefits. Creating SNTs for the disabled, while permitting them to access government aid, is an indispensable legal planning tool.

Last Will & Testament

Introduction:

Most people erroneously believe that Wills are only for the rich. Accordingly, many Americans die without a Will. Under New York laws a Will is a written instrument made to take affect upon death, whereby a person disposes of property or directs how it should be disposed of, and is revocable during their lifetime. The person making the Will is called the Testator. The amount of property an individual has is irrelevant to whether or not an individual needs a will. The Will serves many essential functions not contingent on the wealth of the Testator.

Function:

In addition to designating the transfer of property and assets a Will may be used to designate guardianship of minor children. Making a Will is the simplest way to ensure that your children are provided for and that your property is distributed according to your wishes. Conversely, without a Will to indicate your wishes, the Courts can distribute your property pursuant to the Laws of Intestacy. Intestacy or Intestate is the legal term for your status if you die without a Will. Moreover, if you have no apparent heirs and die without a Will, your estate may be absorbed by the state.

The Process:

In order to draft a Will best suited to your situation, your attorney needs to have all relevant information. The domicile of the Testator at the time of death is an important fact. A Will must meet specific State standards to be valid and enforceable. Domicile determines which state laws, including issues of estate tax, will control. It is also important to know the full extent of a Testator's real and personal property, the identity of their family members and the identity of any potential beneficiaries.

Surviving Spouse:

Under New York Law, a parent can disinherit their children; however, a surviving spouse can not be disinherited. Any attempt to disinherit a surviving spouse will fail if challenged by the surviving spouse. New York and many states provide a surviving spouse with a right of election. This is a right to elect not to accept the terms of the Will. In New York, upon the death of a spouse, the surviving spouse can choose the greater of $50,000 or one third of the decedent spouse's net estate. Whether a spouse dies and seeks to completely disinherit the surviving spouse or makes a Will prior to marriage not mentioning the surviving spouse; the surviving spouse has a right of election. In addition, a surviving spouse is entitled to an "exempt personal property set aside". These personal items include a car, furniture and cash up to $15,000; with a total value generally not exceeding $56,000. Moreover, these items come "off the top" over and above property passing to the spouse by Will, intestate share or elective share.

Executor:

An Executor is appointed by the Testator in the Will. The Executor's job is to carry out the Testator's wishes. Their duties include (i) collection of all estate assets, (ii) determining any claims against the estate, (iii) filing required tax forms and (iv) distributing the assets to beneficiaries listed in the Will.

Due to the importance of these functions, a qualified individual should be elected Executor. Additionally, an alternative Executor should be named in the event that the named Executor is unable or unwilling to act.

It is important to note that not all assets are subject to the provisions of a Will. A Will generally controls the property in your name. Property held jointly with a right of survivorship passes, by operation of law to the surviving joint owner (ex: joint bank accounts or joint tenancy). Similarly, retirement benefits, life insurance proceeds, trust accounts and defined beneficiary items generally name specific beneficiaries and are distributed by operation of law.

Guardian:

The appointment of a guardian becomes necessary if a Testator has minor children. A testamentary Guardian is specifically charged with the duty of taking care of the Testators minor children. Accordingly, a Guardian should be chosen with due diligence; they should posses the ethical and moral standards the Testator would want imparted to his or her children. The appointed Guardian will only play a role where Testator and spouse die in a common disaster or the spouse has predeceased the Testator.

Funeral Arrangements:

Notwithstanding the need to designate your wishes in a Will, there are certain instructions which may be inappropriate to place in a Will; namely, burial instructions. Generally, the surviving spouse or next to kin has the right to make funeral arrangements. Funeral arrangement are usually made immediately after the Testator's death and well before the Will is examined. It is therefore advisable to communicate burial wishes directly to the spouse and/or next of kin. Many people use a "Letter of Instruction" for this purpose and have their attorney draft it along with their Will.

Conclusion:

Under New York Law, there is no prescribed format for drafting a Will. However, New York does prescribe strict testamentary formalities for the execution and attestation of a Will. A properly drafted Will can (i) simplify the administration of the estate, (ii) facilitate the smooth transfer of property to designated individuals, (iii) provide for the care of minor children and (iv) give effect to the decedent's wishes. A Will is an important legal document. It is always advisable to use a qualified Attorney for the purpose of drafting your Will. Moreover, should the need arise, your Will can be updated or modified by your Attorney by way of an amendment called a Codicil or redrafting the entire document.

Feel free to contact me if you have any questions.