Spectrum Arch, Inc.Leaving money directly to a son or daughter with a disability can backfire. An inheritance in their name can push them over the SSI and Medicaid resource limits and cost them the services they depend on. A supplemental needs trust (SNT) is the usual way around that.
What an SNT does
An SNT holds money for a person with a disability and pays for things that supplement government benefits, rather than replace them, so the person keeps their eligibility for programs like Medicaid and SSI. In New York, these trusts are governed by EPTL 7-1.12 and are called supplemental needs trusts; elsewhere you'll hear "special needs trusts".
The three types
Third-party trusts
Set up and funded by someone else, usually parents or grandparents, with their own money. This is the main tool for estate planning: parents can name the trust in their will or as the beneficiary of life insurance. There's no Medicaid payback, so whatever is left when the beneficiary dies goes to the people the parents chose.
First-party trusts
Funded with the person's own money: for example a lawsuit settlement, back benefits, or an inheritance they've already received. These must include a payback provision: when the beneficiary dies, Medicaid is repaid for the care it provided, up to what remains in the trust.
Pooled trusts
Run by a nonprofit, which pools accounts for investment while keeping a separate account for each person. They're useful when the amount is too small for a standalone trust, or when no family member can serve as trustee. Programs serving New Yorkers include NYSARC Trust Services and others. Rules about what happens to remaining funds vary by program, so read the agreement.
SNT or ABLE account?
They work well together. ABLE accounts are simple and flexible but limited to $19,000 a year in contributions. SNTs can hold much larger sums, such as an inheritance or life insurance.
Get it done right
The wording of an SNT matters enormously. A badly drafted trust can cost someone their benefits. Work with an attorney who practices special needs or elder law, and review your will, beneficiary designations, and letter of intent at the same time.
Sources: NYSARC Trust Services, FAQ; NYSARC Trust Services, Glossary; Supplemental needs trust (overview).