Special Needs Trust Attorney in Smithtown & Syosset, NY
Protect Your Child's Future and Government Benefits
THE INHERITANCE DILEMA
You want to leave money to your child with disabilities. But if you do it wrong, they lose everything.
Without a special needs trust:
- You leave your child $75,000 in your will
- They inherit the money
- SSI stops immediately (asset limit: $2,000)
- Medicaid ends
- They spend the inheritance on medical care and living expenses
- Within 2-3 years, it’s gone
- They reapply for benefits
Result:Â Your $75,000 funded survival, not quality of life.
With a special needs trust:
- You create a trust in your estate plan
- Trust receives the $75,000
- Your child keeps SSI and Medicaid
- Trust pays for therapy, equipment, recreation, education
- Money lasts for their lifetime
Result:Â Your $75,000 enhances their life for decades while benefits cover basic needs.
This is what special needs trusts do—protect benefits while improving quality of life.
📞 Ready to protect your child’s benefits and inheritance?
Call our Smithtown office at (631) 406-5580 or Syosset office at (516) 321-4010
WHAT IS A SPECIAL NEEDS TRUST?
A special needs trust (SNT)—also called a supplemental needs trust—is a legal arrangement that holds money for a person with disabilities without disqualifying them from government benefits.
How It Works
The structure:
1. Trust is created (in your will, as a living trust, or by court order)
2. Trust receives assets (inheritance, settlement, gifts, life insurance)
3. Trustee manages the money
4. Trustee distributes funds for beneficiary’s benefit
5. Beneficiary keeps SSI, Medicaid, and other benefits
6. The key: assets in a properly structured special needs trust don’t count toward SSI’s $2,000 asset limit.
Â
Why “Special Needs” and “Supplemental Needs”
Both terms mean the same thing. The trust is “supplemental” because it supplements government benefits—it doesn’t replace them.
Government benefits cover:
Basic living expenses (SSI provides cash)
Medical care (Medicaid)
Some therapy and equipment (Medicaid)
The trust covers extras:
Additional therapy beyond what Medicaid provides
Specialized equipment and technology
Education and training
Recreation and social activities
Quality of life improvements
Â
Who Needs a Special Needs Trust
Anyone receiving or likely to receive:
SSI (Supplemental Security Income):Â Cash benefit with strict $2,000 asset limit
Medicaid:Â Healthcare coverage with asset limits
Other means-tested benefits:Â SNAP, Section 8 housing, etc.
Common situations:
Parents want to leave inheritance to child with disabilities
Child receives personal injury settlement
Grandparent wants to leave money to grandchild on benefits
Child receives unexpected inheritance
Family wants to pool resources for disabled relative
Note on SSDI: Social Security Disability Insurance (SSDI) has no asset limits. If your child only receives SSDI (not SSI), you may not need a special needs trust for benefit preservation at this time. However, many people receive both SSI and SSDI, and SSDI recipients often qualify for Medicaid, which does have asset limits.
Suffolk County Example: What One Trust Provided
A special needs trust for a 25-year-old with cerebral palsy in Hauppauge paid for: Accessible van ($45,000) iPad with communication software ($1,200) Physical therapy 2x/week beyond Medicaid coverage ($8,000/year) Adaptive bike ($3,500) Summer camp ($6,000/year) Personal care aide 10 hours/week above Medicaid allowance ($15,000/year) Annual vacation to Florida with family ($4,000) Total annual expenses: ~$33,000 plus one-time purchases. None of this affected her SSI or Medicaid. The trust transformed her quality of life.
TYPES OF SUPPLEMENTAL NEEDS TRUSTS
There are four main types. Which one you need depends on whose money funds the trust and when it’s created
Third-Party Special Needs Trust
Who creates it:Â Parents, grandparents, or other family members
Whose money:Â Someone else’s money (not the beneficiary’s)
When used:Â Estate planning
This is the most common type. Parents create the trust as part of their estate plan to receive inheritances for their child with disabilities.
Key features:
- Funded with your money, not beneficiary’s
- Created during your life or in your will
- No Medicaid payback required
- Remaining funds pass to whomever you designate (often siblings)
- You control the ultimate disposition of assets
- Can be created at any age
How it’s structured:
Typically created as a subtrust within your revocable living trust or testamentary trust (created in your will). When you die, assets pour into the special needs trust for your child’s benefit.
However, if it is anticipated that other family members will contribute assets to the trust, or if you want to fund it during your life, it is best to consider an inter vivos third-party supplemental needs trust.
Syosset example: Parents with two children—one with Down syndrome receiving SSI, one without disabilities. They create revocable living trust with special needs subtrust. Will directs $400,000 to special needs trust for son with Down syndrome and $400,000 outright to other son. Both receive equal inheritances, but son with disabilities keeps his benefits. Unlike the first-party special needs trust, when the special needs child passes, there is no payback to Medicaid and the other son can receive the remaining trust funds.
First-Party (Self-Settled) Special Needs Trust
Who creates it:Â Court, parent, grandparent, legal guardian, or the person themselves
Whose money:Â The disabled person’s own money
When used:Â Person with disabilities receives money (settlement, inheritance, back pay)
This protects money that already belongs to the person with disabilities.
Key features:
- Funded with beneficiary’s own assets
- Must be created before beneficiary turns 65
- Requires Medicaid payback provision
- After death, Medicaid recoups what it paid, then remainder goes to designated beneficiaries
- More restrictive than third-party trusts
- Must be irrevocable
Common scenarios:
- Personal injury settlement: Person on SSI receives $500,000 lawsuit settlement
- Inheritance received directly:Â Grandmother left $50,000 directly to grandchild (before parents set up planning)
- SSDI back pay:Â Large lump sum of past-due disability benefits
- Workers’ compensation award
Critical timing:Â In some cases, you have as little as 30 days to establish the trust after receiving funds. Contact a special needs attorney immediately if your child receives money.
Smithtown example:Â 22-year-old with autism receives $300,000 personal injury settlement from car accident. He’s on SSI and Medicaid. Attorney establishes first-party special needs trust within 30 days. Money goes into trust, he keeps benefits, trust pays for lifelong care. When he dies, Medicaid will recoup costs (estimated $200,000), and remaining ~$100,000 goes to his siblings.
Testamentary Special Needs Trust
Who creates it:Â You (in your will)
Whose money:Â Your money (third-party)
When created:Â Trust doesn’t exist until you die
This is a third-party trust created in your will instead of during your lifetime.
Key features:
- Created as part of your will
- Comes into existence when you die
- Must go through probate
- Becomes public record
- Same benefit protection as standalone third-party trust
- No Medicaid payback
Advantages:
- Lower upfront cost (part of will, not separate trust document)
- Flexibility during your life (can amend will as needed)
- Simpler structure
- Appropriate when estate is modest or child is young
Disadvantages:
- Goes through probate (time, cost, public record)
- Less privacy
- May take months to access funds after your death
- Less flexibility in trust design and management
Best for:Â Young parents with modest estates creating basic plans. As estate grows, consider revocable living trust with special needs subtrust.
Pooled Trust
Who manages it:Â Nonprofit organization
Whose money:Â Can be first-party or third-party
When used:Â Alternative to individual trusts
Nonprofit maintains a master trust with individual sub-accounts for each beneficiary.
Key features:
- Organization serves as trustee
- Individual accounting for each beneficiary
- Funds are pooled for investment purposes
- Can accept first-party or third-party funding
- No age 65 limit for first-party contributions (unlike individual first-party trusts)
Advantages:
- Lower setup fees ($1,000-$2,500)
- Professional management
- No need to find individual trustee
- Can accept contributions after age 65
Disadvantages:
- Less family control over investments and distributions
- Portion of remaining funds may go to nonprofit (not family)
- Annual and monthly fees (typically 1-2% of assets plus distribution fees)
- Organization’s procedures may limit flexibility
Best for:Â Smaller amounts (under $100,000), late-in-life planning, or when no suitable family trustee exists.
Frequently Asked Questions About Special Needs Trusts
What is a special needs trust?
A special needs trust (SNT), also called a supplemental needs trust, holds assets for a person with disabilities without affecting their eligibility for SSI, Medicaid, and other government benefits. The trust pays for quality of life items not covered by benefits—therapy, equipment, education, recreation—while the beneficiary continues receiving benefits for basic needs and healthcare.
What's the difference between a third-party and first-party special needs trust?
AÂ third-party SNT is funded with someone else's money (typically parents' inheritance or lifetime gifts) and has no Medicaid payback. A first-party SNTÂ is funded with the disabled person's own money (settlement, inheritance received) and requires Medicaid payback after death. Third-party trusts are used in estate planning; first-party trusts protect money the person already received.
Will a special needs trust affect my child's SSI or Medicaid?
No, if properly structured and administered. A correctly drafted special needs trust does not count toward the $2,000 asset limit for SSI. Your child keeps full benefits while the trust pays for extras. Critical: the trust cannot give cash directly to the beneficiary or pay for food and shelter directly, as this would reduce SSI benefits
What happens to money remaining in the trust after my child dies?
For third-party trusts, remaining funds go to whomever you designate in the trust (typically siblings or other family members). For first-party trusts, Medicaid must be repaid first for all services provided, then the remainder goes to designated beneficiaries. This is why third-party trusts are preferred for estate planning.
When should I create a special needs trust?
As early as possible. Many parents create special needs trusts as part of their estate planning when children are young. The trust is in place whenever needed. If your child receives a settlement or inheritance, you may have as little as 30 days to establish a first-party trust—contact an attorney immediately.
Can I serve as trustee of my child's special needs trust?
Yes, you can serve during your lifetime. You must name successor trustees to continue after your death. Many parents serve as initial trustee, then have a sibling or professional take over.