For families across New York, few questions weigh heavier than this one: “What happens to my child — or my spouse, my sibling, my parent — with a disability after I am gone?” You want to leave them something. You want their life to be richer, safer, and more comfortable. But there is a cruel trap built into the system: if you simply leave money to a loved one who receives Medicaid or Supplemental Security Income (SSI), that gift can disqualify them from the very benefits they depend on to survive.
A Special Needs Trust (SNT) — also called a Supplemental Needs Trust — is the legal tool that solves this dilemma. Authorized under New York Estates, Powers and Trusts Law (EPTL) § 7-1.12, an SNT lets you provide for a disabled family member’s comfort, dignity, and quality of life without costing them their means-tested public benefits. At Morgan Legal Group, attorney Russel Morgan, Esq. helps New York families — from Manhattan and Brooklyn to Long Island, Westchester, the Hudson Valley, and Upstate — build trusts that protect the people they love most.
Why a Family Needs a Special Needs Trust
This is, at its heart, a family decision. The person you are protecting is rarely an abstraction — it is a son with autism, a daughter recovering from a traumatic injury, an aging spouse with dementia, or a brother with a lifelong developmental disability. The instinct to provide for them is natural. The danger is that good intentions, carried out the wrong way, can backfire.
Here is the problem in plain terms:
- Medicaid and SSI are means-tested — eligibility depends on the recipient owning very limited assets (in New York, generally no more than a few thousand dollars).
- An inheritance, a lawsuit settlement, or even a generous gift can push a disabled person over that limit, suspending or terminating their coverage.
- Once benefits are lost, the family often must spend the entire inheritance on care that Medicaid would otherwise have provided — leaving nothing for the “extras” that make life worth living.
An SNT breaks this cycle. Assets held in a properly drafted Special Needs Trust are not counted as the beneficiary’s own resources. The beneficiary keeps Medicaid and SSI, while the trust pays for everything those programs don’t cover.
What an SNT Can Pay For
A Special Needs Trust is meant to supplement — not replace — government benefits. The trustee can use trust funds for an enormous range of quality-of-life expenses that improve a beneficiary’s daily life.
| The Trust CAN Typically Pay For | Use With Caution (May Affect SSI) |
|---|---|
| Therapies and medical care not covered by Medicaid | Direct cash payments to the beneficiary |
| Specialized equipment, computers, assistive technology | Food and shelter paid directly (may reduce SSI) |
| Education, tutoring, and vocational training | Rent paid straight to a landlord (without planning) |
| Travel, vacations, and recreation | |
| A vehicle or transportation costs | |
| Personal care attendants and companions | |
| Furniture, electronics, and hobbies | |
| Pet care, entertainment, and life’s small joys |
Because distributions for food and shelter can reduce SSI, an experienced trustee — guided by counsel — manages spending carefully. This is one reason families should never attempt an SNT from a template. The drafting and the administration both matter.
The Two Main Types of New York Special Needs Trusts
Not all SNTs are the same. The right structure depends on whose money funds the trust.
First-Party (Self-Settled) SNT
A first-party SNT holds assets that belong to the disabled person themselves — for example, a personal-injury settlement, a direct inheritance, or back-paid benefits. Because the funds are the beneficiary’s own, federal and New York law require a Medicaid “payback” provision: when the beneficiary passes away, the state must be reimbursed for Medicaid benefits paid during their lifetime, up to the amount remaining in the trust. These trusts must generally be established before the beneficiary turns 65.
Third-Party SNT
A third-party SNT is funded by someone else — most often a parent, grandparent, or sibling planning ahead. This is the trust most families use in their estate plan. Its enormous advantage: there is no Medicaid payback requirement. Whatever remains when the beneficiary dies can pass to other family members — siblings, nieces, nephews — exactly as you direct. For parents, this is the gold standard: protect your child during their life, then keep the family’s wealth in the family.
Most third-party SNTs are created through a revocable living trust or a will that “pours” the disabled beneficiary’s share into the SNT. Learn more about your broader options on our Trusts Overview page, and see how a Trust vs. Will compares for your family’s needs.
How an SNT Fits Into Your Family’s Estate Plan
A Special Needs Trust rarely stands alone. It works alongside the rest of your plan:
- A Revocable Living Trust lets you keep control of your assets during your life, avoid probate, and direct a disabled beneficiary’s share into an SNT at your death — privately and without court delay.
- An Irrevocable Trust may be paired with SNT planning when Medicaid asset protection for yourself is also a goal. Remember New York’s 5-year look-back for Medicaid: transfers into an irrevocable trust must generally be made five years before applying for nursing-home Medicaid.
- For larger estates, coordinated planning also keeps an eye on the New York estate tax. For 2026, the basic exclusion amount is $7,350,000, but New York imposes a harsh “cliff”: estates exceeding 105% of the exclusion — $7,717,500 — lose the entire exemption and are taxed on the full value. A revocable living trust alone does not reduce estate tax (the assets remain in your taxable estate); irrevocable strategies are required for that goal.
Choosing and Guiding Your Trustee
The trustee is the person — or institution — who manages the SNT for your loved one. Because a disabled beneficiary often cannot manage the funds themselves, the trustee’s role is profoundly important and lasts a lifetime.
Under EPTL Article 11-A, every New York trustee is held to the prudent-investor standard, meaning they must invest and manage trust assets with care, skill, and caution. Trustees also owe a duty of loyalty (acting solely in the beneficiary’s interest, never their own) and a duty to account to beneficiaries — keeping clear records and reporting on the trust’s activity.
For an SNT, a trustee must do all of that and understand the labyrinth of Medicaid and SSI rules — a single careless distribution can jeopardize benefits. Many families choose a trusted relative, a professional fiduciary, or a combination (a family co-trustee for the heart, a professional co-trustee for the rules). Trustee commissions in New York are set by statutory schedules under the SCPA and EPTL, not by guesswork. Our Trust Administration page explains what trustees must do once the trust is in motion.
A Family Scenario
Consider Maria and David, parents of an adult son, Luca, who has cerebral palsy and receives Medicaid and SSI. They have two other children. Maria’s instinct was to “just split everything three ways” in her will. But leaving Luca a one-third share outright would have ended his benefits and forced his siblings to either watch his coverage collapse or quietly take on his care.
Instead, Morgan Legal Group built a third-party Special Needs Trust within their plan. Luca’s share now flows into the SNT, managed by his sister as trustee with a professional co-trustee. His Medicaid and SSI continue untouched; the trust pays for his therapies, a wheelchair-accessible van, and an annual family trip. And because it is a third-party trust, whatever remains at Luca’s death passes to his siblings — no Medicaid payback. The family’s love is protected, and so is the family’s legacy.
Frequently Asked Questions
Will a Special Needs Trust make my loved one lose their Medicaid or SSI?
No — that is precisely the point of an SNT under EPTL § 7-1.12. Assets properly held in a Special Needs Trust are not counted as the beneficiary’s own resources, so Medicaid and SSI eligibility is preserved. The danger comes from leaving money outright instead of in trust, or from a poorly administered trust making the wrong kind of distributions.
What is the difference between a first-party and a third-party SNT?
A first-party (self-settled) SNT holds the disabled person’s own assets and must include a Medicaid payback provision at death. A third-party SNT is funded by family members and has no payback — any remaining funds can pass to other relatives. For parents planning ahead, the third-party SNT is almost always the right tool.
Can I create the Special Needs Trust now, before I pass away?
Yes. A third-party SNT can be created and funded during your lifetime (often through a revocable living trust) or established at death through your will or trust. Setting it up early gives the trust time to be funded, lets you name and guide your trustee, and ensures your wishes are clear and legally binding.
Does a Special Needs Trust avoid probate?
When an SNT is created as part of a revocable living trust, the assets pass to it privately and avoid probate in the Surrogate’s Court. By contrast, a will must be probated — a public, court-supervised process. A trust-based plan keeps your family’s affairs private and avoids delay.
How do I get started with a New York Special Needs Trust?
Begin with a conversation. Morgan Legal Group will review your family’s situation, your loved one’s benefits, and your goals, then recommend the right structure. Schedule a consultation with Russel Morgan, Esq. to protect the family member who needs you most.
Protect the People You Love — Statewide in New York
Whether you live in New York City, on Long Island, in Westchester, the Hudson Valley, or Upstate, Morgan Legal Group helps families build Special Needs Trusts that stand the test of time. Your loved one deserves comfort, dignity, and security — and your family deserves the peace of mind that comes from a plan done right.
Schedule your 30-minute consultation today.
This page is general information about New York law and is not legal advice. For guidance on your family’s circumstances, consult a qualified attorney.
Further reading from Morgan Legal Group: how trusts work in New York.