Special Needs Trust Attorney in New York

When someone you love has a disability, a gift, inheritance, or lawsuit settlement can create an unexpected problem. Money meant to help may count against eligibility for Medicaid and other needs-based programs. A special needs trust, which New York law calls a supplemental needs trust, is a common planning tool to hold those funds for the person's benefit. Schwartsman Law Group helps New York families choose the right kind of trust, draft it, and fit it together with wills, powers of attorney, and guardianship planning. Call (212) 518-3868 or schedule a Free Consultation.

What a Special Needs Trust Does

A special needs trust holds money or property for a person with a disability. A trustee manages the assets and spends them to improve the beneficiary's quality of life, without handing the money directly to the beneficiary. The goal is to help pay for things public programs do not cover while keeping the beneficiary eligible for those programs.

Families usually come to us at one of these points:

• A child has been diagnosed with a disability and the parents want to plan their own estate around that child's long-term needs.
• An adult with a disability is about to receive a personal injury settlement, back payment, or inheritance in their own name.
• A grandparent or other relative wants to leave money to a family member with a disability without disrupting that person's benefits.
• A family is starting a guardianship and wants the financial side handled at the same time.

The right structure depends mostly on one question: whose money is going into the trust?

Three Main Types of Special Needs Trusts

First-party trusts under 42 U.S.C. § 1396p(d)(4)(A)

A first-party trust holds the beneficiary's own assets, such as a settlement, savings, or an inheritance that has already passed to them outright. Federal Medicaid law recognizes this type of trust when it meets specific conditions. Under 42 U.S.C. § 1396p(d)(4)(A), the trust:

• contains the assets of an individual under age 65 who is disabled;
• is established for that individual's benefit by the individual, a parent, a grandparent, a legal guardian, or a court; and
• provides that the State will receive all amounts remaining in the trust when the individual dies, up to the total medical assistance paid on the individual's behalf.

That last condition is often called the payback provision. It is the central trade-off of a first-party trust: the beneficiary has the benefit of the funds during life, and Medicaid is repaid from what remains. New York's Social Services Law tracks this category in SSL § 366(2)(b)(2)(iii)(A), which likewise describes a first-party trust for a person under 65, created by the individual, a parent, a grandparent, a guardian, or a court, with payback.

Pooled trusts under 42 U.S.C. § 1396p(d)(4)(C)

A pooled trust is another way to hold a person's own assets. Under 42 U.S.C. § 1396p(d)(4)(C), the trust is established and managed by a non-profit association. Each beneficiary has a separate account, but the non-profit pools the accounts for investment and management. The accounts are established solely for the benefit of individuals who are disabled. New York's counterpart is SSL § 366(2)(b)(2)(iii)(B).

Pooled trusts can make sense when the amount is modest, when no family member is in a position to serve as trustee, or when a standalone trust is not practical. Each non-profit has its own joinder agreement and policies, and we review those documents with you before you sign.

Third-party trusts

A third-party trust is funded with someone else's money, usually from parents, grandparents, or other relatives. It is commonly created as part of a parent's will or living trust, or as a standalone trust that relatives can add to over time. Because the assets never belonged to the beneficiary, a third-party trust is a different planning tool from the (d)(4)(A) and (d)(4)(C) trusts above, which are built to hold the beneficiary's own assets. Careful drafting matters: the trustee's powers, distribution standards, and remainder beneficiaries should be written with the beneficiary's benefits in mind.

Feature	First-party (d)(4)(A)	Pooled (d)(4)(C)	Third-party
Whose assets	The beneficiary's own	The beneficiary's own	Family members or others
Who sets it up	The individual, a parent, grandparent, legal guardian, or court	Established and managed by a non-profit association	The person funding it, often a parent
Who serves as trustee	A family member or professional trustee	The non-profit	A family member or professional trustee
What happens at death	The State receives remaining amounts up to the total medical assistance paid	Set by the non-profit's trust terms; we review them with you	Set by the trust document the family signs

How New York Law Fits In

Federal law sets the framework for Medicaid trusts, and New York law fills in the details. EPTL § 7-1.12 is New York's supplemental needs trust statute, and SSL § 366 governs how trusts are treated for New York Medicaid eligibility. We draft with both in mind, so the trust language lines up with how New York agencies review it.

New York's general trust rules also apply. Under EPTL § 7-1.17, a lifetime trust must be in writing and executed and acknowledged by the creator and at least one trustee (unless the creator is the sole trustee), or executed in front of two witnesses. Amendments follow the same formalities. Under EPTL § 7-1.18, a lifetime trust is valid only to the extent assets are actually transferred to it. A statement in the document that property has been transferred is not enough. In practice, funding the trust is a separate step that has to be completed, not assumed.

Funding the Trust

How a trust is funded often matters as much as how it is drafted. Common funding sources include:

• Personal injury or malpractice settlements. When the injured person has a disability, the settlement may need to go into a first-party or pooled trust. A court is one of the parties that can establish a first-party trust, which can matter when a settlement is already before a judge.
• Inheritances. If a relative's will leaves money outright to a person with a disability, the family may need to act quickly to protect eligibility. A better approach is planning ahead so the will leaves that share to a third-party trust instead.
• Parents' estate plans. Parents can name a third-party trust in their wills, living trusts, life insurance, and retirement account beneficiary designations, so assets flow to the trust rather than to the child directly.
• Lifetime gifts. Relatives can add to a third-party trust during life. For 2026, the federal annual gift tax exclusion is $19,000 per recipient, which helps families plan the size and timing of gifts.

When a parent's will is the vehicle, it must be signed correctly. Under EPTL § 3-2.1, a New York will is signed at the end, signed or acknowledged before each of two witnesses, and declared to each witness to be the testator's will, with the witnesses signing within one 30-day period. New York has enacted an electronic wills law, but it does not take effect until December 12, 2027, so we use traditional execution with two witnesses.

Medicaid Timing and the Look-Back

Timing matters when assets are moved before applying for long-term care Medicaid. For nursing home care, the look-back period is 60 months (42 U.S.C. § 1396p(c)(1)(B); SSL § 366(5)(e)). New York has proposed a 30-month look-back for community-based (home care) Medicaid, but that change is not in effect, and plans should not treat it as current law.

Transfers made within the look-back period are reviewed when an application is filed, so talk with counsel before moving assets.

Choosing the Right Trustee

The trustee makes the day-to-day decisions: paying for therapies, equipment, education, travel, or housing-related costs, keeping records, and coordinating with benefit rules. A good trustee is organized, available, and willing to learn how distributions interact with the beneficiary's benefits. Families often consider:

• a parent or sibling as trustee, sometimes with a professional co-trustee;
• a corporate or professional trustee for larger trusts;
• a pooled trust non-profit when no individual trustee is available; and
• successor trustees, so the trust keeps working if the first trustee can no longer serve.

We draft clear distribution standards and give trustees practical guidance so they can act with confidence.

Special Needs Trusts and Guardianship

A special needs trust manages money. It does not give anyone authority to make personal, medical, or legal decisions for an adult. When a child with an intellectual or developmental disability turns 18, parents often need to consider guardianship or other decision-making arrangements as well.

New York has two main guardianship paths:

• SCPA Article 17-A (Surrogate's Court) for people with intellectual or developmental disabilities. Under SCPA §§ 1750 and 1750-a, the petition is supported by certifications from two professionals: a physician and a psychologist, or two physicians. For a developmental disability, the condition generally must have begun before age 22, with an exception for traumatic brain injury.
• Mental Hygiene Law Article 81 for adults who need help because of functional limitations. Under MHL § 81.02, the court must find that a guardian is necessary and that the person agrees or is incapacitated, and incapacity must be shown by clear and convincing evidence.

Planning tools can affect a guardianship case. Under MHL § 81.03(e), the "available resources" a court considers expressly include powers of attorney, health care proxies, trusts, and representative and protective payees. Article 81 also calls for the least restrictive form of intervention (MHL § 81.03(d)). A well-built plan may narrow what a guardianship needs to cover. Learn more on our guardianship services page.

The Parents' Own Planning Documents

Parents who care for a child with a disability should also protect themselves. If a parent becomes incapacitated, someone needs authority to manage that parent's finances and keep the plan funded.

• Power of attorney. The New York statutory short form under GOL § 5-1501B (current version effective October 25, 2023) is printed in 12-point type, signed and dated, acknowledged before a notary, and witnessed by two people. The notary may serve as one of the witnesses. Agents sign and acknowledge as well.
• Health care proxy. Under PHL § 2981, a health care proxy is signed before two adult witnesses, and the agent cannot serve as a witness.
• Will or living trust. These documents can name the third-party trust as beneficiary and name trustees and guardians for the future.

How We Work With Families

Our process is straightforward:

• Listen first. We learn about the beneficiary's needs, current benefits, family resources, and who can realistically help over time.
• Identify the source of funds. Whether the money belongs to the beneficiary or to family members drives the choice between a first-party, pooled, or third-party trust.
• Draft and coordinate. We prepare the trust and update related wills, beneficiary designations, powers of attorney, and health care proxies so they work together.
• Complete funding. We help retitle accounts and confirm transfers, since a trust holds only what is actually put into it.
• Support the trustee. We explain record-keeping and distribution practices, and we stay available as questions come up.

Serving Families Across New York City and Long Island

We work with families in Manhattan, Brooklyn, Queens, the Bronx, Staten Island, and Long Island. When a special needs trust is tied to an estate or an Article 17-A guardianship, the Surrogate's Court in the relevant county is often involved, including the courthouses on Chambers Street in Manhattan, Johnson Street in Brooklyn, Sutphin Boulevard in Jamaica, the Grand Concourse in the Bronx, Richmond Terrace on Staten Island, and Center Drive in Riverhead. Our attorneys are licensed in New York.

Read Our Special Needs Trust Guide

For a longer walk-through of trust types, trustee duties, and common questions, see our New York special needs trust guide.

Talk With a New York Special Needs Trust Attorney

Every family's situation is different. The right trust depends on whose assets are involved, the beneficiary's age and benefits, and the family's long-term goals. Call (212) 518-3868 or request a Free Consultation to talk through your options.