In 1993, a monumental change was made by the United States Congress, affecting the landscape of estate planning. It was in that year when Congress granted special needs trusts a legal status.
This allowed parents, family, and other interested parties invest in the well-being of a person with disabilities. As defined in Section 7-1.12 in the Estates, Powers & Trusts Law, anyone with a cognitive, mental or physical disability can be provided for with the creation of a special needs trust in Long Island.
The trust, often a standalone legal document, contains the details and instructions of how the assets funded in it should be used to care for the beneficiary. The trustee who manages the trust is then the one providing the beneficiary with the required funds to meet supplemental needs.
The mechanics of a special needs trust in Long Island
There are certain considerations that need to be addressed when the administration of a special needs trust is undertaken. To ensure that it takes place without anything going awry, a basic understanding of how the trust works is imperative.Firstly, there are three parties involved in a special needs trust in Long Island. The donor is the one providing the assets, the trustee is the one managing them, and the beneficiary is the one with the special needs benefitting from it. The trust’s terms contain instructions on how the funds should be utilized.
The explanation above may simplify the basics of what a special needs trust in Long Island is but there are other factors that may create some consternation when it’s time to administer it.
The do’s and don’ts
One of the major considerations with a special needs trust in Long Island is the disbursement of the funds. Pursuant to EPTL Section 7-1.12, the trust is used to pay for the supplemental needs of a special needs person.
There are a lot of limitations and rules regarding what expenses can be paid from the trust and the trustee makes the payment. With the expertise of an estate planning lawyer in Brooklyn can be helpful in avoiding actions that jeopardize the beneficiary’s eligibility for government aid.
For instance, cash forwarded directly to the beneficiary can affect their eligibility. It’s the trustee’s responsibility to make the payments directly to vendors. Non-refundable payments for goods or services can be permitted. Other exemptions include:
- A home purchased by the trustee in the name of the trust as it would not be considered a resource for the beneficiary. While renovations are not considered income, payments for rent, utilities, taxes, etc. are.
- Computer technology, software, cable or satellite services, phone and internet services, etc. will also not impact the eligibility.
- Automobile under the trust’s name.
- Furniture for the house.
- Pre-paid funeral and burial arrangement not in the ownership of the beneficiary are allowed.
- Legal and accounting fees.
To reiterate our point, there are several complexities in determining the boundaries of what expenses can come out of the trust without impacting the Medicaid eligibility of the beneficiary.
It’s crucial for the betterment of the beneficiary that the trustee and donor both understand the intricacies of what goes into creating and administering a special needs trust in Long Island. Without it, it can hurt the beneficiary’s chances of receiving the help and care they need to have a good life.
A few helpful pointers for that are as below:
- Do have open and honest communication about the trust and how it’s going to play out.
- Do keep the person with disability’s education, training, retirement, and associated needs in mind.
- Do ascertain the validity and soundness of the trust to prevent debarment from getting public benefits.
- Don’t neglect the early planning needed for a special needs trust in Long Island.
- Don’t fund the trust with assets and life insurance that can complicate the disbursement of income.
Another important consideration with special needs trust is the trustee. If you’re not choosing a pooled special needs trust, then pay close attention while designating the responsibility that impacts your loved one’s quality of life.
It can be a close friend or family member or professional fiduciary, bank, lawyer, trust company, etc. Whoever it is, they should at least have an in-depth familiarity with how a special needs trust in Long Island works. Along with that, they should have an understanding of the benefit program the beneficiary relies on.
Other considerations include your own comfort choosing the person, their trustworthiness, whether you think they have the time to act as the trustee, and if they will make the best decisions for the beneficiary.
The decision is very personal but involves looking over technicalities as well. You have to ensure they are financially savvy but also ethical in their conduct. This is where an unbiased estate planning lawyer in Long Island can help you choose the best possible outcome.