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First Party Supplemental Needs Trusts

First Party Supplemental Needs Trusts

Q: I am 50 years old and a recent injury has left me in a wheel chair permanently.  I need help with certain daily tasks such as bathing and getting dressed.  I am not working but I am receiving payments from my disability insurance.  I know community Medicaid will pay for my care if I qualify but I am afraid I have too much income, will they take my disability payments?


A: Since you are under 65 years old, you can create a first party supplemental needs trust to hold the income that you are receiving in excess of the Medicaid allowable amount.  The first party supplemental needs trust created for a person under 65 requires that someone other than yourself serve as trustee.  The trustee has the discretion to make payments to or for your benefit.  However, the trustee is limited by the trust terms from exercising this discretion for any purpose that would replace a government benefit you are receiving.  The trust assets are meant to supplement your benefits, not replace them.  If you are on community Medicaid and they are providing care for 4 hours per day, then your trust cannot supplement the payment to the aides for those same four hours.  However, your trust can pay for additional hours that the program will not provide to you.  As long as you are not on any other government benefits, the trust can pay for food, clothing, travel, etc.  The trust funds can be expended for your benefit only.

It is important to note that while you can put money into the trust only until you turn 65 years old, the assets that have accumulated in the trust can be used for your benefit for your entire lifetime.  To be a valid first party supplemental needs trust for these purposes, the document will state that the Medicaid program will receive a payback at the time of your death.  The payback to Medicaid is determined by the amount that was expended for your by the program during your lifetime but recovery is limited to the amount of funds remaining in the trust. 

Previously, the law stated that this type of trust could only be created by a parent, grandparent, guardian, or court.  The Federal 21st Century Cures Act amended this so that an individual disabled person can create this type of trust for their own benefit without court approval.  Much advocacy went into this on the federal level and state level to create an “enabling statute” to allow this change to be on the books in New York State.  The Department of Health of New York issued a directive on May 22, 2017 directing the local departments of social services on this matter.  These departments determine eligibility for the Medicaid program.  The directive states that effective “immediately”, assets held in a trust created by a disabled person for their own benefit should not be deemed an available resource for determining Medicaid eligibility.  The New York State Social Services Law was subsequently amended to come into compliance with the Federal law, making it clear that an individual in New York State can create and fund their own first party supplemental needs trust.

This change is small in that it only adds one word to the rule, but the impact is enormous.  Before, disabled individuals had to involve family members or petition a court to protect their assets and receive the care they need.  This change gives broader options to disabled individuals to get the assistance needed.


-           Nancy Burner, Esq. and Britt Burner, Esq.

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