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Trusts for Low Income, Disabled and Special Needs Individuals


One of the trickiest aspects of leaving property and assets to friends and family members on your death is considering the implications that flow from leaving the gift.  Unfortunately, these implications are often overlooked by the person making the gift (especially those not assisted by attorneys) before their death.  Tax implications are one of the considerations that one has to factor as they plan out how property is distributed.  Another factor is the recipient’s financial status.  A donor should consider whether the gift is going to an individual who has a low income, has special needs or is disabled and relies on means-tested government benefits.  One may not see any harm in leaving wealth to a friend or a family member who may need more assistance than others.  The truth is that a generous gift made by a well-meaning donor may push the recipient’s assets over the maximum  threshold required for them to qualify for various means-tested benefits. However, there are ways around these issues.

Effect on Means-Tested Benefits

Means-tested benefits are government-funded benefits that are available to individuals who are at a specific income level. These benefits are also allocated to individuals who have certain mental or physical conditions and are deemed unable to work to provide for themselves.  These benefits include Medicaid, Supplemental Security Income (SSI), housing subsidies, and food subsidies. For example, SSI pays monthly benefits to people with limited income and resources that are disabled, blind, or age 65 or older. One or more of these benefits serve as a means to meet the individual basic needs. The effect of a large inheritance or gift could be to have the value of the gift make the recipient ineligible for those means-tested benefits.  And, depending on the circumstances, they may find it difficult to regain those benefits in the future.

Supplemental Needs Trust 

One useful way of avoiding the effects described above is to create a supplemental needs trust. A supplemental needs trust is a trust designed to hold and disburse inheritances, gifts, settlements and other assets.  As a result, government agencies that administer SSI and Medicaid do not consider the trust property or its disbursement as income for the purposes of determining whether the individual is entitled to the means-tested benefit.

Structure of Supplemental Needs Trust

Just as a typical trust, the trust will have a trustee who has discretion over trust disbursements as well as the purpose for which funds are disbursed. The terms of the trust should prohibit the trustee from making disbursements that would undermine the beneficiary’s eligibility for SSI and Medicaid. These types of trusts are created for the sole benefit of the beneficiary; thus, creditors are generally not permitted to reach it.

Contact Us for Legal Assistance

If you have a friend or loved one who is special needs, disabled or low income, it is wise to explore strategic options before making large distributions. The option of a supplemental needs trust will alleviate instances where a gift may take them out of the running for valuable means-tested benefits. To learn more about the process and how to best prepare for this scenario, contact an experienced New York estate planning attorney at Meyer & Spencer, P.C. or call us at (914)741-2288.

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