SUPPLEMENTAL NEEDS TRUSTS
STATUTE RESOURCE REFERENCE MANUAL
Michelle A. Daubert, JD student, University at Buffalo School of Law
Anthony Szczygiel, Professor
Legal Services for the Elderly Clinic, University at Buffalo School of Law
Sally Speed, Director
Medicaid Training Resource System
Funding for this research project was provided by the Department of Health Training Resource System, Contract year 2006: Project 1052504, Award 38403; Contract year 2007: Project 1059690, Award: 41708, through the Center for Development of Human Services, College Relations Group, Research Foundation of SUNY, Buffalo State College.
STATUTORY BASIS FOR SNTs:
Statute Explanation / Citation / Quotation
Federal definition of an SNT / Federal law does not define an SNT. / N/A
New York State definition of an SNT / N.Y. Est. Powers & Trusts Law § 7-1.12(a)(5). / Defines an SNT as a discretionary trust “established for the benefit of a person with a severe and chronic or persistent disability.”
An SNT may only be established in New York State for individuals who are disabled within the meaning of both the Federal Social Security Disability law and the New York State law:
Federal definition of a disabled individual / 42 U.S.C. § 1382c(a)(3)(A). / A person who “is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve months.”
New York State definition of a disabled individual / N.Y. Est. Powers & Trusts Law § 7-1.12(a)(4). / A “[p]erson with a severe and chronic or persistent disability” means a person (i) with mental illness, developmental disability, or other physical or mental impairment; (ii) whose disability is expected to, or does, give rise to a long-term need for specialized health, mental health, developmental disabilities, social or other related services; and (iii) who may need to rely on governmental benefits or assistance.”
There are two very key aspects of any SNT, regardless of whether it is individual or pooled, self-settled or third-party, are the following:
First key aspect under New York State law. / N.Y. Est. Powers & Trusts Law § 7-1.12(a)(5)(ii). / “The trust document prohibits the trustee from expending or distributing trust assets in any way which may supplant, impair or diminish government benefits or assistance for which the beneficiary may otherwise be eligible or which the beneficiary may be receiving . . . .”
Second key aspect under New York State law. / N.Y. Est. Powers & Trusts Law § 7-1.12(a)(5)(iii). / “the beneficiary does not have the power to assign, encumber, direct, distribute or authorize distributions from the trust”
INDIVIDUAL SNTs:
Statute Explanation / Citation / Quotation
Individual SNTs are created pursuant to this Federal statute / 42 U.S.C. § 1396p(d)(4)(A). / (d) Treatment of trust amounts
(4) This subsection shall not apply to any of the following trusts:
(A) A trust containing the assets of an individual under age 65 who is disabled (as defined in section 1382c(a)(3) of this title) and which is established for the benefit of such individual by a parent, grandparent, legal guardian of the individual, or a court if the State will receive all amounts remaining in the trust upon the death of such individual up to an amount equal to the total medical assistance paid on behalf of the individual under a State plan under this subchapter.
Individual SNTs are created pursuant to these New York State statutes / N.Y. Soc. Servs. Law § 366(2)(b)(2)(iii)(A).
N.Y. Comp. Codes R. & Regs. tit. 18, § 360-4.5(b)(5)(i)(a). / N.Y. Soc. Servs. Law § 366(2)(b)(2)(iii)(A):
(iii) Notwithstanding the provisions of clauses (i) and (ii) of this subparagraph, in the case of an applicant or recipient who is disabled, as such term is defined in section 1614(a)(3) of the federal social security act, the department must not consider as available income or resources the corpus or income of the following trusts which comply with the provisions of the regulations authorized by clause (iv) of this subparagraph:
(A) a trust containing the assets of such a disabled individual which was established for the benefit of the disabled individual while such individual was under sixty-five years of age by a parent, grandparent, legal guardian, or court of competent jurisdiction, if upon the death of such individual the state will receive all amounts remaining in the trust up to the total value of all medical assistance paid on behalf of such individual;
N.Y. Comp. Codes R. & Regs. tit. 18, § 360-4.5(b)(5)(i)(a):
(b) Inter vivos trusts created on or after August 11, 1993. For purposes of this subdivision, an individual will be considered to have created a trust if assets of the individual were used to form all or part of the principal (corpus) of the trust, the trust was established other than by will, and the trust was established by: the individual; the individual's spouse; a person acting at the direction of the individual or the individual's spouse, including a court or administrative body; or a person with the legal authority to act in place of or on behalf of the individual or the individual's spouse, including a court or administrative body. In the case of a trust which contains the assets of an individual and of another person or persons, the provisions of this subdivision apply to the portion of a trust's assets which are attributable to the individual.
(5) Exceptions.
(i) Notwithstanding the provisions of paragraphs (1)-(4) of this subdivision, the principal and income of the following trusts must not be considered as available income or resources:
(a) A trust containing the assets of a disabled individual if: the trust was created for the benefit of the disabled individual when the disabled individual was under the age of 65; the trust was established by a parent, grandparent, legal guardian, or court of competent jurisdiction; and the trust agreement provides that upon the death of the individual the State must receive all amounts remaining in the trust up to the total value of all MA paid on behalf of the individual.
POOLED SNTs:
Statute Explanation / Citation / Quotation
Pooled SNTs are created pursuant to this Federal statute / 42 U.S.C. § 1396p(d)(4)(C). / (d) Treatment of trust amounts
(4) This subsection shall not apply to any of the following trusts:
(C) A trust containing the assets of an individual who is disabled (as defined in section 1382c(a)(3) of this title) that meets the following conditions:
(i) The trust is established and managed by a nonprofit association.
(ii) A separate account is maintained for each beneficiary of the trust, but, for purposes of investment and management of funds, the trust pools these accounts.
(iii) Accounts in the trust are established solely for the benefit of individuals who are disabled (as defined in section 1382c(a)(3) of this title) by the parent, grandparent, or legal guardian of such individuals, by such individuals, or by a court.
(iv) To the extent that amounts remaining in the beneficiary's account upon the death of the beneficiary are not retained by the trust, the trust pays to the State from such remaining amounts in the account an amount equal to the total amount of medical assistance paid on behalf of the beneficiary under the State plan under this subchapter.*
Pooled SNTs are created pursuant to these New York State statutes / N.Y. Soc. Servs. Law § 366(2)(b)(2)(iii)(B).
N.Y. Comp. Codes R. & Regs. tit. 18, § 360-4.5(b)(5)(i)(b). / N.Y. Soc. Servs. Law § 366(2)(b)(2)(iii)(B):
(iii) Notwithstanding the provisions of clauses (i) and (ii) of this subparagraph, in the case of an applicant or recipient who is disabled, as such term is defined in section 1614(a)(3) of the federal social security act, the department must not consider as available income or resources the corpus or income of the following trusts which comply with the provisions of the regulations authorized by clause (iv) of this subparagraph:
(B) and a trust containing the assets of such a disabled individual established and managed by a non-profit association which maintains separate accounts for the benefit of disabled individuals, but, for purposes of investment and management of trust funds, pools the accounts, provided that accounts in the trust fund are established solely for the benefit of individuals who are disabled as such term is defined in section 1614(a)(3) of the federal social security act by such disabled individual, a parent, grandparent, legal guardian, or court of competent jurisdiction, and to the extent that amounts remaining in the individual's account are not retained by the trust upon the death of the individual, the state will receive all such remaining amounts up to the total value of all medical assistance paid on behalf of such individual. Notwithstanding any law to the contrary, a not-for-profit corporation may, in furtherance of and as an adjunct to its corporate purposes, act as trustee of a trust for persons with disabilities established pursuant to this subclause, provided that a trust company, as defined in subdivision seven of section one hundred-c of the banking law, acts as co-trustee.
(iv) The department shall promulgate such regulations as may be necessary to carry out the provisions of this subparagraph. Such regulations shall include provisions for: assuring the fulfillment of fiduciary obligations of the trustee with respect to the remainder interest of the department or state; monitoring pooled trusts; applying this subdivision to legal instruments and other devices similar to trusts, in accordance with applicable federal rules and regulations; and establishing procedures under which the application of this subdivision will be waived with respect to an applicant or recipient who demonstrates that such application would work an undue hardship on him or her, in accordance with standards specified by the secretary of the federal department of health and human services. Such regulations may require: notification of the department of the creation or funding of such a trust for the benefit of an applicant for or recipient of medical assistance; notification of the department of the death of a beneficiary of such a trust who is a current or former recipient of medical assistance; in the case of a trust, the corpus of which exceeds one hundred thousand dollars, notification of the department of transactions tending to substantially deplete the trust corpus; notification of the department of any transactions involving transfers from the trust corpus for less than fair market value; the bonding of the trustee when the assets of such a trust equal or exceed one million dollars, unless a court of competent jurisdiction waives such requirement; and the bonding of the trustee when the assets of such a trust are less than one million dollars, upon order of a court of competent jurisdiction. The department, together with the banking department, shall promulgate regulations governing the establishment, management and monitoring of trusts established pursuant to subclause (B) of clause (iii) of this subparagraph in which a not-for-profit corporation and a trust company serve as co-trustees.
N.Y. Comp. Codes R. & Regs. tit. 18, § 360-4.5(b)(5)(i)(b):
(b) Inter vivos trusts created on or after August 11, 1993. For purposes of this subdivision, an individual will be considered to have created a trust if assets of the individual were used to form all or part of the principal (corpus) of the trust, the trust was established other than by will, and the trust was established by: the individual; the individual's spouse; a person acting at the direction of the individual or the individual's spouse, including a court or administrative body; or a person with the legal authority to act in place of or on behalf of the individual or the individual's spouse, including a court or administrative body. In the case of a trust which contains the assets of an individual and of another person or persons, the provisions of this subdivision apply to the portion of a trust's assets which are attributable to the individual.
(5) Exceptions.
(i) Notwithstanding the provisions of paragraphs (1)-(4) of this subdivision, the principal and income of the following trusts must not be considered as available income or resources:
(b) A trust containing the assets of a disabled individual if: the trust is established and managed by a non-profit association which maintains separate accounts for the benefit of disabled individuals, but for purposes of investment and management of trust funds, pools the accounts; each account in the trust is established solely for the benefit of a disabled individual by the individual, by the parent, grandparent, or legal guardian of the individual, or by a court of competent jurisdiction; and upon the individual's death amounts remaining in the individual's account which are not retained by the trust must be paid to the State up to the total value of all MA paid on behalf of the individual.
SOCIAL SECURITY PROGRAM OPERATIONS MANUAL SYSTEM (POMS)
Statute Explanation / Citation / Quotation
Trusts Established Prior to 1/1/00, Trusts Established by Third Parties and Trusts Not Subject to Section 1613(e) of the Social Security Act à Sets forth definitions regarding trusts and types of trusts, including the definition of a SNT. Trusts as resources is also included. / SI 01120.200 / Due to the length, for this section please visit:
https://s044a90.ssa.gov/apps10/poms.nsf/subchapterlist!openview&restricttocategory=05011
Trusts Established by an Individual on or after 1/1/00 à This is the “Main POM” concerning the establishment of trusts. It includes definitions, the treatment of trusts, and specifically whether trust assets are considered resources. It also covers the policy of the Social Security Administration (“SSA”) regarding whether a trust is established for the benefit of/on behalf of/for the sole benefit of a beneficiary. / SI 01120.201 / Due to the length, for this section please visit:
https://s044a90.ssa.gov/apps10/poms.nsf/subchapterlist!openview&restricttocategory=05011
Development and Documentation of Trusts Established on or after 1/1/00 à This POM sets forth the basic procedures the SSA applies in reviewing a trust document, which POM instructions apply to various trusts, summarizes the steps of trust development, and how the trusts are documented and coded within the SSA system. / SI 01120.202 / Due to the length, for this section please visit:
https://s044a90.ssa.gov/apps10/poms.nsf/subchapterlist!openview&restricttocategory=05011
Exceptions to Counting Trusts Established on or after 1/1/00 à This is the exception to the Main POM (SI 01120.201). It individually sets forth the requirements that must be met for a trust to satisfactorily be either an individual SNT or a pooled SNT. It also covers allowable and prohibited expenses. Additionally, revocable trusts processed under the SSA policy in effect from 1/1/2000 through 1/31/01 must be reevaluated because under the prior policy, the SSA did not count as a resource any trust meeting the requirements of an individual or pooled SNT. However, the current policy is that both types of SNTs are not resource exclusions. / SI 01120.203 / Due to the length, for this section please visit:
https://s044a90.ssa.gov/apps10/poms.nsf/subchapterlist!openview&restricttocategory=05011
TRUST DISTRIBUTIONS: