§ 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.
