NY Est Pow & Trusts L § 7-1.12 (2021)
2021 New York Laws EPT - Estates, Powers and Trusts Article 7 - Trusts Part 1 - Rules Governing Trusts 7-1.12 - Supplemental Needs Trusts Established for Persons With Severe and Chronic or Persistent Disabilities

§ 7-1.12 Supplemental  needs  trusts established for persons with severe            and chronic or persistent disabilities  (a) Definitions: When used in this section, unless otherwise expressly stated or unless the context otherwise requires:  (1)  "Developmental  disability"  means  developmental  disability  as defined  in subdivision twenty-two of section 1.03 of the mental hygiene law.  (2) "Government benefits or assistance" means any program of  benefits or  assistance  which  is  intended  to  provide  or  pay  for  support, maintenance or health care and which is established or administered,  in whole  or  in  part,  by  any  federal,  state,  county,  city  or other governmental entity.  (3) "Mental illness" means mental illness as  defined  in  subdivision twenty of section 1.03 of the mental hygiene law.  (4)  "Person 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 government benefits or assistance.  (5) "Supplemental needs trust" means a discretionary trust established for  the  benefit  of  a  person with a severe and chronic or persistent disability (the "beneficiary") which conforms to all  of  the  following criteria:  (i)  The  trust  document  clearly  evidences  the creator's intent to supplement, not supplant, impair or  diminish,  government  benefits  or assistance  for which the beneficiary may otherwise be eligible or which the beneficiary may be receiving, except as provided in clause  (ii)  of this subparagraph;  (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; provided, however, that the trustee  may  be  authorized  to  make  such distributions to third parties to meet the beneficiary's needs for food, clothing,  shelter or health care but only if the trustee determines (A) that  the  beneficiary's  basic  needs  will  be  better  met  if   such distribution  is  made,  and  (B)  that  it is in the beneficiary's best interests to suffer the consequent effect, if any, on the  beneficiary's eligibility for or receipt of government benefits or assistance;  (iii)  The  beneficiary  does  not have the power to assign, encumber, direct, distribute or authorize distributions from the trust;  (iv) If an inter vivos trust, the creator of the trust is a person  or entity other than the beneficiary or the beneficiary's spouse; and  (v)   Notwithstanding   subparagraph   (iv)  of  this  paragraph,  the beneficiary of a supplemental needs trust may  be  the  creator  of  the trust  if  such  trust  meets  the  requirements  of subparagraph two of paragraph (b) of subdivision two of section three hundred  sixty-six  of the  social  services  law  and  of  the  regulations  implementing such clauses. Provided, however,  that  if  the  trust  is  funded  with  the proceeds  of retroactive payments made as a result of a court action and due the beneficiary  under  the  federal  supplemental  security  income program,  as  established under title XVI of the federal social security act, the creation of a supplemental needs trust by the beneficiary under this subparagraph shall not impair nor limit any right under  applicable law  of  a  representative  payee  to  receive reimbursement out of such proceeds for expenses incurred on behalf of the beneficiary pending  the  determination   of   the  beneficiary's  eligibility  for  such  federal supplemental security income program, nor any right under applicable law of any state or local governmental entity which provided the beneficiary with  interim  assistance pending the determination of the beneficiary's eligibility for such federal supplemental security income program to  be repaid out of such proceeds for the amount of such interim assistance.  (6)  A  "beneficiary"  means  a  person  with  a severe and chronic or persistent disability who is  a  beneficiary  of  a  supplemental  needs trust.  (b)  A  supplemental needs trust shall be construed in accordance with the following:  (1) It shall be presumed that the creator of the trust  intended  that neither  principal nor income be used to pay for any expense which would otherwise be paid by government benefits or  assistance  for  which  the beneficiary  might  otherwise be eligible or which the beneficiary might be receiving, notwithstanding any authority the trustee may have to make distributions for food, clothing, shelter or health care as provided  in clause (ii) of subparagraph five of paragraph (a) of this section;  (2)  Section  7-1.6  of  this  article  shall not be applicable to the extent that the application or  possible  application  of  that  section would  reduce  or  eliminate the beneficiary's entitlement to government benefits or assistance;  (3) Neither principal nor income held in  trust  shall  be  deemed  an available  resource  to  the beneficiary under any program of government benefits or assistance; however, actual distributions from the trust may be considered to be income or resources of the beneficiary to the extent provided by the terms of any such program;  (4) The trustee of the trust shall not be deemed to be holding  assets for  the benefit of the beneficiary for purposes of section 43.03 of the mental hygiene law or section one hundred four of  the  social  services law; and  (5)  If  the  trust  provides  the  trustee with the authority to make distributions for food, clothing, shelter or health care as provided  in clause  (ii)  of subparagraph five of paragraph (a) of this section, and if the mere existence of that authority would, under the  terms  of  any program   of   government   benefits   or   assistance,  result  in  the beneficiary's loss of government benefits or assistance,  regardless  of whether such authority were actually exercised, then:  (i)  if  the trust instrument expressly provides, such provision shall be null and void and the trustee's authority to make such  distributions shall cease and shall be limited as otherwise provided; or  (ii)  the  trust  shall  no  longer be treated as a supplemental needs trust under this section and the trust shall be construed, and the trust assets considered, without regard to the provisions of this section.  (c) (1) Paragraph (b) of this section shall not apply  to  the  extent that  the  trust  is funded, directly or indirectly, by the beneficiary, except as provided in clause (v) of subparagraph five of  paragraph  (a) of  this  section,  by someone with a legal obligation of support to the beneficiary, or by someone with  another  financial  obligation  to  the beneficiary   to  the  extent  of  such  obligation,  at  the  time  the beneficiary is receiving or applying to receive:  (i) Government benefits or assistance for which an income and resource calculation is made; or  (ii) Services, care or assistance for which payment  or  reimbursement is  or  may  be  sought under section 43.03 of the mental hygiene law or section one hundred four of the social services law.  (2) To the extent that said paragraph (b) does not  apply,  the  trust shall  not  be treated as a supplemental needs trust under this section,  and the trust shall be  construed,  and  the  trust  assets  considered, without regard to the provisions of this section.  (d) The provisions of paragraph (b) of this section shall not apply to bar  claims  by  government against persons with an interest in or under the trust other than the beneficiary.  (e) (1) The following  language  may  be  used  as  part  of  a  trust instrument,  but  is  not required, to qualify a trust as a supplemental needs trust:   1.  The  property  shall  be  held,  IN  TRUST,  for  the  benefit  of ________________________  (hereinafter  the  "beneficiary") and shall be held, managed, invested and reinvested by the trustee, who shall collect the income therefrom and,  after  deducting  all  charges  and  expenses properly attributable thereto, shall, at any time and from time to time, apply for the benefit of the beneficiary, so much (even to the extent of the  whole)  of  the  net  income  and/or principal of this trust as the trustee  shall  deem  advisable,  in  his  or  her  sole  and   absolute discretion,  subject  to  the  limitations  set forth below. The trustee shall add to the principal of such trust the balance of net  income  not so paid or applied.   2.  It  is  the  grantor's intent to create a supplemental needs trust which conforms to the provisions of  section  7-1.12  of  the  New  York estates,  powers  and  trusts  law.  The  grantor intends that the trust assets be used to supplement, not  supplant,  impair  or  diminish,  any benefits  or  assistance  of  any federal, state, county, city, or other governmental entity for which the beneficiary may otherwise be  eligible or  which the beneficiary may be receiving. Consistent with that intent, it is the grantor's desire that, before expending any amounts  from  the net  income  and/or  principal  of  this trust, the trustee consider the availability of all  benefits  from  government  or  private  assistance programs  for  which  the  beneficiary  may  be eligible and that, where appropriate and to the extent possible, the trustee endeavor to maximize the collection of such benefits and to facilitate  the  distribution  of such benefits for the benefit of the beneficiary.   3.  None  of the income or principal of this trust shall be applied in such a manner as to supplant, impair or diminish benefits or  assistance of  any  federal,  state, county, city, or other governmental entity for which the beneficiary may otherwise be eligible or which the beneficiary may be receiving.   4. The beneficiary does  not  have  the  power  to  assign,  encumber, direct, distribute or authorize distributions from this trust.  (2)  (i)  If the creator elects, the following additional language may be used:   5. Notwithstanding the provisions of paragraphs two and  three  above, the  trustee  may  make distributions to meet the beneficiary's need for food, clothing, shelter or health care even if  such  distributions  may result  in  an  impairment or diminution of the beneficiary's receipt or eligibility for government  benefits  or  assistance  but  only  if  the trustee  determines  that (i) the beneficiary's needs will be better met if such distribution is made, and (ii) it is in the  beneficiary's  best interests  to suffer the consequent effect, if any, on the beneficiary's eligibility for or receipt of government benefits or assistance.  (ii) If the trustee  is  provided  with  the  authority  to  make  the distributions  as  described  in  subparagraph  (2) (i), the creator may elect to add the following clause:   ; provided, however, that if  the  mere  existence  of  the  trustee's authority  to make distributions pursuant to this paragraph shall result in  the  beneficiary's  loss  of  government  benefits  or   assistance, regardless  of  whether  such  authority  is  actually  exercised,  this  paragraph shall be null and void and the  trustee's  authority  to  make such  distributions  shall  cease  and  shall  be limited as provided in paragraphs two and three above, without exception.  (f)   Nothing   in   this  section  shall  affect  the  establishment, interpretation or construction of trust instruments which do not conform with the provisions of this section, nor shall this section  impair  the state's  authority  to be paid from or seek reimbursement from any trust which does not conform with the provisions of this section  or  to  deem the  principal  or  income of such trust an available resource under any program of government benefits or assistance.