N.Y. EPT Law § 7-1.12 — New York Code / Act EPT / Article 7 / Part 1 / Section 7-1.12
Supplemental needs trusts established for persons with severe
Status: in_force

§ 7-1.12 Supplemental needs trusts established for persons with severe\n           and chronic or persistent disabilities\n  (a) Definitions: When used in this section, unless otherwise expressly\nstated or unless the context otherwise requires:\n  (1) "Developmental disability" means developmental disability as\ndefined in subdivision twenty-two of section 1.03 of the mental hygiene\nlaw.\n  (2) "Government benefits or assistance" means any program of benefits\nor assistance which is intended to provide or pay for support,\nmaintenance or health care and which is established or administered, in\nwhole or in part, by any federal, state, county, city or other\ngovernmental entity.\n  (3) "Mental illness" means mental illness as defined in subdivision\ntwenty of section 1.03 of the mental hygiene law.\n  (4) "Person with a severe and chronic or persistent disability" means\na person (i) with mental illness, developmental disability, or other\nphysical or mental impairment;\n  (ii) whose disability is expected to, or does, give rise to a\nlong-term need for specialized health, mental health, developmental\ndisabilities, social or other related services; and\n  (iii) who may need to rely on government benefits or assistance.\n  (5) "Supplemental needs trust" means a discretionary trust established\nfor the benefit of a person with a severe and chronic or persistent\ndisability (the "beneficiary") which conforms to all of the following\ncriteria:\n  (i) The trust document clearly evidences the creator's intent to\nsupplement, not supplant, impair or diminish, government benefits or\nassistance for which the beneficiary may otherwise be eligible or which\nthe beneficiary may be receiving, except as provided in clause (ii) of\nthis subparagraph;\n  (ii) The trust document prohibits the trustee from expending or\ndistributing trust assets in any way which may supplant, impair or\ndiminish government benefits or assistance for which the beneficiary may\notherwise be eligible or which the beneficiary may be receiving;\nprovided, however, that the trustee may be authorized to make such\ndistributions to third parties to meet the beneficiary's needs for food,\nclothing, shelter or health care but only if the trustee determines (A)\nthat the beneficiary's basic needs will be better met if such\ndistribution is made, and (B) that it is in the beneficiary's best\ninterests to suffer the consequent effect, if any, on the beneficiary's\neligibility for or receipt of government benefits or assistance;\n  (iii) The beneficiary does not have the power to assign, encumber,\ndirect, distribute or authorize distributions from the trust;\n  (iv) If an inter vivos trust, the creator of the trust is a person or\nentity other than the beneficiary or the beneficiary's spouse; and\n  (v) Notwithstanding subparagraph (iv) of this paragraph, the\nbeneficiary of a supplemental needs trust may be the creator of the\ntrust if such trust meets the requirements of subparagraph two of\nparagraph (b) of subdivision two of section three hundred sixty-six of\nthe social services law and of the regulations implementing such\nclauses. Provided, however, that if the trust is funded with the\nproceeds of retroactive payments made as a result of a court action and\ndue the beneficiary under the federal supplemental security income\nprogram, as established under title XVI of the federal social security\nact, the creation of a supplemental needs trust by the beneficiary under\nthis subparagraph shall not impair nor limit any right under applicable\nlaw of a representative payee to receive reimbursement out of such\nproceeds for expenses incurred on behalf of the beneficiary pending the\ndetermination of the beneficiary's eligibility for such federal\nsupplemental security income program, nor any right under applicable law\nof any state or local governmental entity which provided the beneficiary\nwith interim assistance pending the determination of the beneficiary's\neligibility for such federal supplemental security income program to be\nrepaid out of such proceeds for the amount of such interim assistance.\n  (6) A "beneficiary" means a person with a severe and chronic or\npersistent disability who is a beneficiary of a supplemental needs\ntrust.\n  (b) A supplemental needs trust shall be construed in accordance with\nthe following:\n  (1) It shall be presumed that the creator of the trust intended that\nneither principal nor income be used to pay for any expense which would\notherwise be paid by government benefits or assistance for which the\nbeneficiary might otherwise be eligible or which the beneficiary might\nbe receiving, notwithstanding any authority the trustee may have to make\ndistributions for food, clothing, shelter or health care as provided in\nclause (ii) of subparagraph five of paragraph (a) of this section;\n  (2) Section 7-1.6 of this article shall not be applicable to the\nextent that the application or possible application of that section\nwould reduce or eliminate the beneficiary's entitlement to government\nbenefits or assistance;\n  (3) Neither principal nor income held in trust shall be deemed an\navailable resource to the beneficiary under any program of government\nbenefits or assistance; however, actual distributions from the trust may\nbe considered to be income or resources of the beneficiary to the extent\nprovided by the terms of any such program;\n  (4) The trustee of the trust shall not be deemed to be holding assets\nfor the benefit of the beneficiary for purposes of section 43.03 of the\nmental hygiene law or section one hundred four of the social services\nlaw; and\n  (5) If the trust provides the trustee with the authority to make\ndistributions for food, clothing, shelter or health care as provided in\nclause (ii) of subparagraph five of paragraph (a) of this section, and\nif the mere existence of that authority would, under the terms of any\nprogram of government benefits or assistance, result in the\nbeneficiary's loss of government benefits or assistance, regardless of\nwhether such authority were actually exercised, then:\n  (i) if the trust instrument expressly provides, such provision shall\nbe null and void and the trustee's authority to make such distributions\nshall cease and shall be limited as otherwise provided; or\n  (ii) the trust shall no longer be treated as a supplemental needs\ntrust under this section and the trust shall be construed, and the trust\nassets considered, without regard to the provisions of this section.\n  (c) (1) Paragraph (b) of this section shall not apply to the extent\nthat the trust is funded, directly or indirectly, by the beneficiary,\nexcept as provided in clause (v) of subparagraph five of paragraph (a)\nof this section, by someone with a legal obligation of support to the\nbeneficiary, or by someone with another financial obligation to the\nbeneficiary to the extent of such obligation, at the time the\nbeneficiary is receiving or applying to receive:\n  (i) Government benefits or assistance for which an income and resource\ncalculation is made; or\n  (ii) Services, care or assistance for which payment or reimbursement\nis or may be sought under section 43.03 of the mental hygiene law or\nsection one hundred four of the social services law.\n  (2) To the extent that said paragraph (b) does not apply, the trust\nshall not be treated as a supplemental needs trust under this section,\nand the trust shall be construed, and the trust assets considered,\nwithout regard to the provisions of this section.\n  (d) The provisions of paragraph (b) of this section shall not apply to\nbar claims by government against persons with an interest in or under\nthe trust other than the beneficiary.\n  (e) (1) The following language may be used as part of a trust\ninstrument, but is not required, to qualify a trust as a supplemental\nneeds trust:\n  1. The property shall be held, IN TRUST, for the benefit of\n________________________ (hereinafter the "beneficiary") and shall be\nheld, managed, invested and reinvested by the trustee, who shall collect\nthe income therefrom and, after deducting all charges and expenses\nproperly attributable thereto, shall, at any time and from time to time,\napply for the benefit of the beneficiary, so much (even to the extent of\nthe whole) of the net income and/or principal of this trust as the\ntrustee shall deem advisable, in his or her sole and absolute\ndiscretion, subject to the limitations set forth below. The trustee\nshall add to the principal of such trust the balance of net income not\nso paid or applied.\n  2. It is the grantor's intent to create a supplemental needs trust\nwhich conforms to the provisions of section 7-1.12 of the New York\nestates, powers and trusts law. The grantor intends that the trust\nassets be used to supplement, not supplant, impair or diminish, any\nbenefits or assistance of any federal, state, county, city, or other\ngovernmental entity for which the beneficiary may otherwise be eligible\nor which the beneficiary may be receiving. Consistent with that intent,\nit is the grantor's desire that, before expending any amounts from the\nnet income and/or principal of this trust, the trustee consider the\navailability of all benefits from government or private assistance\nprograms for which the beneficiary may be eligible and that, where\nappropriate and to the extent possible, the trustee endeavor to maximize\nthe collection of such benefits and to facilitate the distribution of\nsuch benefits for the benefit of the beneficiary.\n  3. None of the income or principal of this trust shall be applied in\nsuch a manner as to supplant, impair or diminish benefits or assistance\nof any federal, state, county, city, or other governmental entity for\nwhich the beneficiary may otherwise be eligible or which the beneficiary\nmay be receiving.\n  4. The beneficiary does not have the power to assign, encumber,\ndirect, distribute or authorize distributions from this trust.\n  (2) (i) If the creator elects, the following additional language may\nbe used:\n  5. Notwithstanding the provisions of paragraphs two and three above,\nthe trustee may make distributions to meet the beneficiary's need for\nfood, clothing, shelter or health care even if such distributions may\nresult in an impairment or diminution of the beneficiary's receipt or\neligibility for government benefits or assistance but only if the\ntrustee determines that (i) the beneficiary's needs will be better met\nif such distribution is made, and (ii) it is in the beneficiary's best\ninterests to suffer the consequent effect, if any, on the beneficiary's\neligibility for or receipt of government benefits or assistance.\n  (ii) If the trustee is provided with the authority to make the\ndistributions as described in subparagraph (2) (i), the creator may\nelect to add the following clause:\n  ; provided, however, that if the mere existence of the trustee's\nauthority to make distributions pursuant to this paragraph shall result\nin the beneficiary's loss of government benefits or assistance,\nregardless of whether such authority is actually exercised, this\nparagraph shall be null and void and the trustee's authority to make\nsuch distributions shall cease and shall be limited as provided in\nparagraphs two and three above, without exception.\n  (f) Nothing in this section shall affect the establishment,\ninterpretation or construction of trust instruments which do not conform\nwith the provisions of this section, nor shall this section impair the\nstate's authority to be paid from or seek reimbursement from any trust\nwhich does not conform with the provisions of this section or to deem\nthe principal or income of such trust an available resource under any\nprogram of government benefits or assistance.\n