Supplemental Needs Trust Attorney in New York

The New York Statute: EPTL § 7-1.12

Most SNT law is federal. The trust exceptions live in 42 U.S.C. § 1396p(d)(4)(A) and (C), the Social Security Administration applies them through POMS SI 01120.200 through SI 01120.203, and New York's Medicaid program applies them through Social Services Law § 366 and 18 NYCRR 360-4.5. New York adds its own layer. EPTL § 7-1.12 defines a supplemental needs trust and tells courts and agencies how to treat one. A trust that fits the statutory definition is not treated as an available resource of the beneficiary, and a trustee is not forced to spend trust funds on care that Medicaid would otherwise cover.

To fit the definition, the instrument must do four things. It must be a discretionary trust for a person with a severe and chronic or persistent disability, measured by the definitions in the Mental Hygiene Law and by a test for physical impairments that are expected to be permanent. Its terms must clearly show the creator's intent to supplement, not supplant, impair or diminish government benefits the beneficiary receives or could receive. It must prohibit the trustee from making distributions that would supplant, impair or diminish those benefits, while permitting the trustee to do so when the trustee determines the benefits and the trust together are insufficient to meet the beneficiary's needs. And the beneficiary must have no power to assign, encumber, direct, distribute or authorize distributions from the trust. A first-party trust must also meet the federal payback and age requirements described below.

A clause of this kind, in a third-party trust we draft, reads along these lines:

“The Grantor intends that this trust qualify as a supplemental needs trust under EPTL § 7-1.12. The trust is established to supplement, and not to supplant, impair or diminish, any benefits or assistance of any federal, state, county, city or other governmental entity for which the Beneficiary may be eligible or which the Beneficiary may be receiving. The Trustee shall not make any distribution that would supplant, impair or diminish such benefits, except that the Trustee may make such distributions as the Trustee, in the Trustee's sole discretion, deems necessary or appropriate if the Trustee determines that the Beneficiary's needs are not being met by such benefits and by the distributions permitted under this Article. The Beneficiary shall have no power to assign, encumber, direct, distribute or authorize distributions from the trust.”

The words matter less than the structure. Out-of-state forms often give the beneficiary a withdrawal right, use a “health, education, maintenance and support” standard that a Medicaid worker reads as a mandatory support trust, or omit the sole-discretion language. Each of those defects can turn the trust into a countable resource in a New York eligibility review.

First-Party Trusts Funded From a Personal Injury or Malpractice Settlement

This is the matter we are most often brought into by other lawyers. A plaintiff on Medicaid or SSI is about to receive a settlement, and the settlement will end those benefits unless it is directed into a (d)(4)(A) trust. The New York sequence runs roughly as follows.

1. Resolve the Medicaid lien. Under Social Services Law § 104-b, Medicaid has a lien on the recovery for care related to the injury. The lien is paid from the settlement before the trust is funded. The lien amount is often negotiable, and the apportionment rules from Arkansas Dept. of Health & Human Servs. v. Ahlborn limit recovery to the portion of the settlement attributable to medical expenses.
2. Identify who establishes the trust. Under 42 U.S.C. § 1396p(d)(4)(A), the trust may be established by the beneficiary (since the Special Needs Trust Fairness Act took effect in December 2016), a parent, a grandparent, a legal guardian or a court. The beneficiary must be under 65 when the trust is created and funded, and must be disabled under the Social Security definition. Funds added after age 65 are treated as transfers.
3. Obtain court approval where required. If the plaintiff is a minor or a person adjudicated incapacitated, the settlement itself requires court approval under CPLR 1207 and 1208, and the court will direct the funds into the SNT rather than into a restricted infant's account under CPLR 1206. If the plaintiff has an Article 81 guardian, Mental Hygiene Law § 81.21 lets the court authorize the guardian to create and fund the trust. If the plaintiff is a competent adult, no statute requires court approval of the trust itself, but many Supreme Court justices in the city and on Long Island want the trust before them with the compromise order, and some settlements are structured so that approval is a condition of funding.
4. Give notice to DOH and the local district. 18 NYCRR 360-4.5(b)(5) and the Department of Health's 96 ADM-8 require that the trustee notify the local social services district (in New York City, the Human Resources Administration) of the creation and funding of the trust, of the beneficiary's death, and in advance of transfers from principal for less than fair market value or that substantially deplete the principal. The regulation sets dollar and percentage thresholds for what counts as substantial depletion, and the trust should recite them. In court-approved matters the proposed trust and the compromise papers are served on the New York State Department of Health and on the district, and the court's order typically recites that notice was given.
5. Include the payback clause. On the beneficiary's death the trustee must repay the State, up to the remaining principal, for all Medicaid paid on the beneficiary's behalf during the beneficiary's lifetime, not only Medicaid paid after the trust was created. Under POMS SI 01120.203, only taxes owed by the trust and reasonable administration expenses may be paid ahead of the State. Funeral expenses may not. A prepaid irrevocable funeral agreement purchased during the beneficiary's life solves that problem.
6. Fund and report. After the order is signed, the settlement proceeds are paid to the trustee, the trustee obtains a tax identification number, and the beneficiary's Medicaid and SSI files are updated with a copy of the trust and the order. The first-party SNT is a grantor trust for income tax purposes, so trust income is reported on the beneficiary's return.

The timeline depends on the court's calendar and on how quickly the lien is resolved. In our experience the trust work runs alongside the settlement rather than after it, so the drafting should begin as soon as a settlement figure is in sight.

An Inheritance That Arrived Without Planning

The second common emergency is an inheritance or life insurance payout left outright to a person on Medicaid or SSI, usually by a grandparent or an aunt who did not know about the disability planning or assumed someone else would handle it. The instinct is to disclaim. In New York that is usually the wrong move. A renunciation under EPTL § 2-1.11 is treated as a transfer of assets for Medicaid purposes and, under POMS SI 01150.110, as a transfer for SSI, and it can trigger a penalty period while giving the money to whoever takes next under the will. The better paths are:

• Under 65: accept the inheritance and place it in a first-party SNT with a payback clause. If the estate is still open, the executor can distribute directly to the trustee. If the beneficiary lacks capacity, a parent or grandparent can establish the trust, or the Surrogate's Court can be asked to direct the distribution into a trust it approves.
• 65 or older: a (d)(4)(A) trust is not available. A pooled trust sub-account with a nonprofit such as NYSARC Trust Services is. For community Medicaid the deposit is not penalized. For nursing home Medicaid, the Department of Health's position in GIS 08 MA/020 is that a transfer of principal to a pooled trust by a person 65 or over is a transfer for less than fair market value and carries a penalty, so the analysis differs for someone who may need institutional care within five years.
• Will still in probate: in some cases the Surrogate's Court will reform a will to redirect an outright bequest into a supplemental needs trust where the decedent's intent to provide for the beneficiary without disqualifying them can be shown. This is fact-specific and requires a petition with notice to the other beneficiaries and to the district.

Timing is tight. SSI counts the inheritance as income in the month received and as a resource the first day of the following month. Medicaid will ask about the funds at the next recertification, and in New York City HRA reviews bank statements. We treat these matters as urgent and open a file the same week.

Pooled Income Trusts and Community Medicaid in 2025

Pooled trusts under 42 U.S.C. § 1396p(d)(4)(C) have a second use in New York that has nothing to do with lump sums: sheltering monthly income so a person can qualify for Medicaid home care. The figures below are the 2025 levels published in the Department of Health's annual GIS message on income and resource standards.

• Medicaid income limit (non-MAGI, aged/blind/disabled): $1,800 per month for a single person and $2,433 for a couple, before the $20 unearned-income disregard and deductions for health insurance premiums.
• Medicaid resource limit: $32,396 for a single person and $43,781 for a couple.
• SSI federal benefit rate: $967 per month for an individual, plus the New York State supplement; the SSI resource limit remains $2,000 for an individual and $3,000 for a couple.

A person whose income exceeds the Medicaid limit has a monthly spend-down. Instead of paying that excess to the district or losing coverage, the person joins a pooled trust, deposits the excess each month into a sub-account, and the nonprofit pays the person's bills (rent, utilities, phone, food, co-pays) from the account. Medicaid then treats the deposited income as unavailable and approves full coverage, including personal care or managed long-term care. To use this route a person 65 or over must be certified disabled. If the Social Security Administration has not already made that finding, the application includes a disability packet (the LDSS-1151 questionnaire and the LDSS-486T medical report) reviewed by the State Disability Review Team, and that review adds weeks to the approval.

Three policy changes shape this work in 2025:

• The 30-month community lookback. The 2020 state budget enacted a lookback and transfer penalty for community-based long-term care. As of our last review it has not been implemented, and the Department of Health has repeatedly moved the start date. Monthly income deposits into a pooled trust are not transfers of resources, so when the lookback arrives it is transfers of principal, not income deposits, that will need to be examined.
• CDPAP consolidation. In 2025 the Consumer Directed Personal Assistance Program moved to a single statewide fiscal intermediary. Pooled income trust clients who rely on CDPAP for their aides had to re-enroll, and the transition caused payment interruptions that the trust had to absorb. The trust itself did not change, but the budgeting did.
• Fees and remainder. Each nonprofit charges an enrollment fee and a monthly fee, and on the beneficiary's death the funds left in the sub-account are retained by the nonprofit or used to repay Medicaid, depending on the trust's joinder agreement. The joinder agreement should be read before signing, because the terms vary among New York pooled trusts.

Third-Party Trusts: Coordinating the Parents' Estate Plan

A third-party SNT is funded with someone else's assets, requires no payback and is the core of a parent's plan for a child with a disability. The drafting is the smaller part of the job. The larger part is making sure everything the parents own flows into the trust rather than around it.

• Wills. Each parent's will leaves the child's share to the trustee of the SNT, never to the child. We also address what happens if the trust fails or terminates early, and we name remainder beneficiaries so the funds pass to siblings or charity at the child's death without a Medicaid claim.
• Retirement accounts. Under the SECURE Act, most non-spouse beneficiaries must empty an inherited IRA within ten years. A trust for a disabled or chronically ill beneficiary that qualifies as an “applicable multi-beneficiary trust” under IRC § 401(a)(9)(H)(iv) may instead take distributions over the beneficiary's life expectancy. The SNT must be drafted to meet that definition, and the IRA beneficiary designation must name the trust, not the child. A beneficiary designation that still says “my children equally” defeats the entire plan.
• Life insurance. A second-to-die policy owned by the parents or by an insurance trust is a common way to fund the SNT at the survivor's death. The beneficiary designation again names the trustee.
• 529 plans and ABLE accounts. A 529 plan can be rolled into a New York ABLE account for the same beneficiary, subject to the ABLE annual contribution limit, which is $19,000 for 2025. ABLE eligibility currently requires disability onset before age 26; on January 1, 2026 that age rises to 46 under the ABLE Age Adjustment Act, which brings many adults with later-onset conditions into the program.
• Income tax. A third-party SNT that meets the requirements can elect to be taxed as a Qualified Disability Trust under IRC § 642(b)(2)(C), which gives the trust an exemption indexed each year (roughly $5,000) instead of the small exemption ordinary trusts receive.
• Letter of intent. Not a legal document, but we ask every family to write one: the child's routines, medications, providers, fears and preferences, so a successor trustee thirty years from now knows the person and not just the balance sheet.

For the broader estate plan around the trust, including powers of attorney and health care proxies, see our pages on advanced New York estate planning techniques, advance directives and what can and cannot go into a revocable trust.

Distribution Rules a New York Trustee Must Know

The trustee's job is to pay for things benefits do not cover without creating countable income. The federal rules that govern this changed in 2024.

• Shelter payments. If the trust pays the beneficiary's rent, mortgage, property taxes, utilities or similar shelter costs, the Social Security Administration treats the payment as in-kind support and maintenance (ISM) and reduces SSI by up to the “presumed maximum value,” which is one-third of the federal benefit rate plus $20, or $342.33 per month in 2025. Many trustees accept that reduction because paying rent from the trust is worth more to the beneficiary than the lost SSI. The decision should be made deliberately and documented.
• Food. Effective September 30, 2024, SSA removed food from the ISM calculation. A trust may now pay for groceries, meal delivery and restaurant meals without reducing SSI. Before that date the same payments were counted.
• Cash and cash equivalents. Cash paid to the beneficiary, and gift cards or prepaid debit cards that can buy food or shelter, are unearned income in the month received. The trustee pays vendors directly instead. A True Link or similar administrator card with merchant restrictions is a workable alternative for day-to-day spending.
• Sole benefit. A first-party trust must be for the sole benefit of the beneficiary under POMS SI 01120.201. Paying a companion's travel costs is permitted when the companion is needed for the beneficiary to travel or receive care. Paying a sibling's tuition is not. Third-party trusts are not bound by the sole-benefit rule, but the trust terms usually impose a similar limit.
• ABLE funding. The trustee may transfer up to the annual limit from the SNT into the beneficiary's NY ABLE account. Housing paid from an ABLE account in the month withdrawn is not ISM under POMS SI 01130.740, which is one reason the two tools are used together.
• Medicaid notice. As described above, the trustee of a first-party trust must give advance notice to the district before large transfers from principal. We provide trustees a written schedule of what triggers notice and a form letter to the district.

What Happens at the Beneficiary's Death

In a first-party or pooled trust the trustee notifies the district and the Department of Health, obtains a statement of total Medicaid paid, pays trust taxes and reasonable final administration expenses, and remits the lesser of the Medicaid total or the remaining balance. In New York City the claim is handled by HRA's Office of Legal Affairs. Any surplus passes under the trust terms. Because the trust assets never belonged to the beneficiary's probate estate, they are not reached by estate recovery under Social Services Law § 369; the payback clause is the State's remedy instead. In a third-party trust there is no payback. The trustee distributes the remainder as the trust directs, often to siblings, and the trust ends. If the parents' will or IRA designation was drafted correctly, nothing passes through the beneficiary's estate and no Medicaid claim arises.

Fixing a Trust That Does Not Comply

We review trusts drafted elsewhere, often decades ago, that would fail an eligibility review. Common defects: a support standard without supplemental language, a withdrawal right at a stated age, a missing payback clause in a self-settled trust, or a trustee who is also the beneficiary. New York offers several repairs. EPTL § 10-6.6 permits a trustee with discretion over principal to decant the trust into a new trust with compliant terms, subject to the statute's notice and limitation requirements. Where decanting is unavailable, the Surrogate's Court or Supreme Court can be asked to reform or modify the trust, with notice to the district. The repair should be made before benefits are applied for, because an agency that has already counted the trust may not give retroactive relief.

Situations We Handle

The matters below describe the kinds of engagements this office takes on. They are composites of recurring fact patterns, not accounts of particular clients, and they describe the work rather than results.

• Settlement for a Medicaid recipient. Trial counsel in a Brooklyn or Bronx malpractice action asks us to prepare the first-party trust, negotiate with HRA on the § 104-b lien, draft the compromise papers and the proposed order, serve the Department of Health and HRA, and appear on the approval. After funding we advise the family trustee or coordinate with a corporate co-trustee on the first year of distributions.
• Parents of an adult child receiving OPWDD services. We prepare a standby third-party SNT, revise both parents' wills to pour into it, redraft the IRA designations so the trust qualifies as an applicable multi-beneficiary trust, and, where appropriate, coordinate with a 17-A guardianship so that decision-making authority and financial planning are handled together.
• Unplanned inheritance. A sibling or executor calls after a will left money outright to a beneficiary on SSI. We stop any disclaimer, set up a first-party or pooled trust depending on age, arrange for the executor to distribute to the trustee, and report to SSA and Medicaid within the deadlines.
• Older New Yorker seeking home care. A client with a pension and Social Security above the $1,800 limit needs Medicaid home care. We handle the pooled trust enrollment, the disability packet if needed, the Medicaid application and the monthly budgeting of the sub-account.

Working With Us

• Who does the work. Albert Goodwin drafts the trust and the supporting documents and handles court appearances. You deal with the attorney, not a document service.
• Fees. Third-party SNT drafting, including the coordinating wills and beneficiary-designation review, is quoted as a flat fee after the initial consultation. Court-approval matters and Medicaid applications depend on the court and the district involved and are quoted separately, either as a flat fee or hourly. We tell you the fee before you commit.
• What to bring. The beneficiary's current benefit award letters (SSI, SSDI, Medicaid, OPWDD, Section 8), any existing trust or will, account statements and beneficiary designations for retirement accounts and life insurance, the settlement documents or estate papers if funds are coming in, and the names of the people you are considering as trustee and successor trustee.
• How long it takes. A third-party trust and supporting documents are usually ready for signing within a few weeks of the consultation. Court-approved first-party trusts track the settlement calendar. Pooled trust enrollments depend on the nonprofit's intake and, for clients over 65 without an SSA disability finding, on the State Disability Review Team.
• Trustees. We advise family trustees on distributions, notice duties and accountings, and we can introduce families to corporate trustees and nonprofit pooled trusts when the trust is large enough to justify professional administration or when no family member is suited to serve. See our page on using a bank as a trustee for the trade-offs.

Frequently Asked Questions

Does New York require court approval for every first-party supplemental needs trust?

No. Court approval is required when the funds belong to a minor or to a person adjudicated incapacitated, because the underlying settlement or distribution requires it under CPLR 1207 or the Mental Hygiene Law. A competent adult may establish and fund their own trust without a court order, though notice to the district is still required when the trust is funded.

Can a person over 65 have a supplemental needs trust in New York?

A third-party SNT, yes, at any age. A first-party (d)(4)(A) trust, no. A pooled trust sub-account, yes, and it is the standard tool for sheltering excess income for community Medicaid. Transfers of principal into a pooled trust after 65 can carry a penalty for nursing home Medicaid.

Should my child disclaim an inheritance to protect Medicaid?

Almost never. A renunciation is treated as a transfer of assets by both Medicaid and SSI. Directing the inheritance into a first-party or pooled trust preserves both the money and the benefits.

Can the trust pay my child's rent?

Yes. If your child receives SSI, the payment reduces the SSI check by up to $342.33 per month in 2025. Food is no longer counted since September 30, 2024. Medicaid eligibility is not affected by shelter payments from the trust.

Who gets the money when the beneficiary dies?

From a first-party trust, the State is repaid for lifetime Medicaid first and the remainder passes under the trust. From a pooled trust, the joinder agreement controls, and the nonprofit usually retains some or all of the balance. From a third-party trust, the remainder passes to whoever the parents named, with no Medicaid claim.

Does the trust have to be registered or made public in New York?

No. A lifetime trust is a private document. A court-approved first-party trust becomes part of the court file, and a testamentary SNT is part of the probated will, but there is no state trust registry. Our page on whether trusts are public record covers this in more detail.

About the Author

This page was written and reviewed by Albert Goodwin, Esq., a New York estate planning and estate litigation attorney whose practice includes supplemental needs trusts, Medicaid planning, guardianship and Surrogate's Court matters in New York City and the surrounding counties. Statutory references, Medicaid figures and SSA rules on this page were last reviewed in 2025. Benefit figures change each January; confirm the current numbers before relying on them.

Speak With a New York Supplemental Needs Trust Attorney

If you are planning for a child with a disability, resolving a settlement for a Medicaid recipient, dealing with an inheritance that threatens benefits, or serving as trustee of an existing trust, we can help. Call the Law Offices of Albert Goodwin at 212-233-1233 or email email@nyestateslawyer.com for a confidential consultation. We meet clients in Manhattan and Brooklyn and by video for families elsewhere in New York State.