What Are Supplemental Needs Trusts?
The Community Medicaid program was created so that financially vulnerable populations could still receive long term care benefits that were comparable to the type of long- term care that was affordable to the middle class. To avoid abuse of the entitlement system, income and asset limits were placed on applicants that would ensure that the intended groups actually received the benefits. Middle class people suffering from an illness or disability were supposed to be able to afford long term care services while maintaining their lifestyles. This did not turn out to be the case. Affordability, as a concept, has been challenged by the actual hourly and daily costs of long-term care for the disabled. Supplemental Needs Trusts have emerged to protect the income and assets of all disabled individuals so that their overall quality of life is sustainable.
There are several types of Supplemental Needs Trusts. First party t
rusts are funded with the disabled person’s own funds or lawsuit awards and the amounts maintained in these Trusts may exceed the New York Medicaid asset limit of $15,900. These trusts are irrevocable and allow a trustee to pay for a range of lifestyle expenses on behalf of the disabled person while still allowing that person to receive Medicaid benefits. The creation of such Trusts are limited to those individuals under 65 years of age and the asset transfers to the Trust must also occur before individuals turn 65. The State usually is the primary beneficiary of the Trust following the disabled person’s death for the purposes of defraying some of the long-term care costs borne by the State.
Third Party Supplemental Needs Trusts are usually created and funded by parents or family of the disabled person to assist with paying for lifestyle costs while continuing to allow that person to remain qualified for Medicaid. Unlike First Party SNT’s, there is no state payback provision in Third Party SNT’s allowing the Trust Creator to choose their own beneficiaries. Third Party SNT’s can be created as a stand- alone document or as part of a Will or another Trust. Developmentally disabled individuals or other disabled persons who are known may have the Trusts specifically tailored to their needs while Third Party SNT language may be included in a Will or Trust to cover other individuals who may become disabled at a later time.
Pooled Supplemental Needs Trusts have become a major part of Community Medicaid planning over the last 20 years. In New York, a Community Medicaid home care recipient is allowed to keep $884 of their income per month. With Social Security benefits and pensions as well as interest and dividend income, a person’s monthly gross amount usually exceeds the Medicaid $884 limit. New York allows the excess income (the amount over the $884 limit) to be deposited by the Medicaid recipient in a special Pooled Supplemental Needs Trust account administered by Not-for-Profit entities approved by New York State. These funds on account in the Pooled SNT can be used to pay for mortgage and other housing costs, daily living costs, travel expenses, car payments, home repair and modification costs among other expenses. Funds still remaining in the Pooled Trust Account when the disabled person dies remain with the Pooled Trust entity. Using up the pooled trust deposits each month should be prioritized.
Supplemental Needs Trusts can also own real property for the disabled person’s use as well as provide sustainable financial support over many decades. For more information on SNT’s, contact the professionals at Sloan and Feller today.