If you care for a child, sibling, spouse, or parent with a disability, you have probably worried about a difficult question: how do you leave money to someone you love without accidentally cutting off the government benefits they depend on? In New York, the answer is usually a Special Needs Trust — sometimes called a Supplemental Needs Trust, or simply an “SNT.”
This page is written for people who are new to the topic. No prior knowledge is assumed. By the end, you will understand what an SNT is, why a well-meaning gift or inheritance can backfire without one, and how New York law treats these trusts. At Morgan Legal Group, attorney Russel Morgan, Esq. and our team help families across the entire state — from New York City and Long Island to Westchester, the Hudson Valley, and Upstate communities — design plans that protect both benefits and dignity.
The Problem an SNT Solves
Many of the most important benefits for people with disabilities are means-tested. That means a person only qualifies if their countable income and assets stay below strict limits. The two big ones are:
- Medicaid — pays for medical care, long-term care, home health aides, and many disability-related services.
- Supplemental Security Income (SSI) — a monthly cash benefit for people with limited resources.
Here is the trap. If a relative leaves your disabled loved one $100,000 in a will, or names them directly on a life-insurance policy, that money becomes a countable asset the moment it arrives. The beneficiary can suddenly be over the limit — and lose Medicaid and SSI until the money is spent down. Years of careful eligibility can vanish because of a generous but uninformed gift.
A Special Needs Trust is the legal tool that breaks this trap. Assets placed in a properly drafted SNT are not counted against the beneficiary, because the beneficiary does not own or control them. A trustee holds and manages the money, using it to supplement — not replace — what government programs provide.
What New York Law Says
Special Needs Trusts in New York are governed by the Estates, Powers and Trusts Law (EPTL). Like all New York trusts, they fall under EPTL Article 7, and the supplemental-needs provisions specifically appear at EPTL § 7-1.12. This statute recognizes that a trust can be written to benefit a person with a severe and chronic disability without disqualifying them from government assistance — provided it is drafted correctly.
The key drafting idea is simple but unforgiving: the trust must give the trustee discretion to make supplemental distributions and must not give the beneficiary the right to demand funds or use them for support the government already covers. A homemade trust that gets this wrong can be treated as a countable resource. Precision matters, which is why families rely on experienced counsel rather than online templates.
Two Main Types of SNT
Not all Special Needs Trusts are the same. The right one depends on whose money is funding the trust. Here is a plain comparison.
| Feature | First-Party SNT | Third-Party SNT |
|---|---|---|
| Whose money funds it? | The disabled person’s own assets (e.g., a lawsuit settlement or inheritance they received directly) | A parent, grandparent, or other relative’s money |
| Common use | “Fixing” assets that already belong to the beneficiary | Estate planning — leaving an inheritance the right way |
| Medicaid payback? | Yes — at the beneficiary’s death, the state is repaid for Medicaid it provided | No — remaining funds pass to family or chosen heirs |
| When to set up | Often urgent, after a windfall arrives | In advance, as part of your own will or living trust |
For most parents planning ahead, the third-party SNT is the cornerstone tool. You create it as part of your own estate plan and direct that any inheritance for your disabled child flows into the trust rather than to the child outright. Because the money was never the child’s, there is no Medicaid payback, and you decide who receives whatever remains.
What the Money Can — and Cannot — Pay For
An SNT is meant to enrich life beyond bare government benefits. A trustee can typically pay for things Medicaid and SSI do not cover, such as:
- Education, tutoring, and vocational training
- Travel, recreation, and hobbies
- A computer, phone, and internet service
- Personal care attendants beyond what Medicaid provides
- Furniture, electronics, and home furnishings
- Therapies and medical care not otherwise covered
What the trustee must be careful with is cash handed directly to the beneficiary and certain payments for food and shelter, which can reduce SSI. This is exactly the kind of nuance an experienced trustee and attorney manage so a good intention does not quietly shrink a benefit check.
The Trustee’s Job Is Serious
Choosing the right trustee is one of the most important decisions in any SNT. A trustee is a fiduciary — held to high legal standards under New York law. Those duties include:
- The prudent-investor standard under EPTL Article 11-A, requiring careful, diversified investment of trust assets.
- A duty of loyalty, meaning the trustee must act solely in the beneficiary’s interest.
- A duty to account, meaning the trustee must keep records and report to beneficiaries about how funds are handled.
For a Special Needs Trust, the trustee also needs to understand benefit rules well enough to avoid distributions that trigger a loss of Medicaid or SSI. Many families choose a knowledgeable individual, a professional trustee, or a combination. Trustees in New York may be entitled to commissions under the schedules set out in the EPTL and the Surrogate’s Court Procedure Act (SCPA); the right structure should be discussed with counsel rather than guessed at. To learn more about ongoing management, see our trust administration overview.
How an SNT Fits With the Rest of Your Plan
A Special Needs Trust rarely stands alone. It is usually one piece of a coordinated estate plan that may include several other tools. It helps to understand how they relate:
- A revocable living trust lets you keep full control of assets during life, avoids probate, and provides for incapacity — but it does not save estate tax, because the assets remain in your taxable estate. An SNT for a child can be funded through it at your death.
- An irrevocable trust generally cannot be changed and is used for estate-tax reduction, asset protection, and Medicaid planning — though it is subject to the 5-year look-back for Medicaid eligibility.
- A will still matters, but remember the core difference in our trust vs. will comparison: a will is public and must be probated in Surrogate’s Court, while a trust is private and avoids probate.
For a fuller picture of how these instruments work together, visit our trusts overview.
A Word on New York Estate Tax in 2026
Families planning larger estates should also keep New York’s estate tax in mind. For 2026, the New York basic exclusion amount is $7,350,000. New York also has a feature commonly called the “cliff.” If an estate exceeds 105% of the exclusion — $7,717,500 — it loses the entire exemption, not just the amount over the line. Coordinating an SNT with broader tax planning, often using an irrevocable trust, can matter a great deal for higher-net-worth families. This is general information, not tax advice for your specific situation.
Why Families Across New York Work With Morgan Legal Group
Drafting an SNT is detail-driven work where small wording choices have large consequences. Morgan Legal Group serves clients statewide — wherever you live in New York, the same EPTL framework applies. Attorney Russel Morgan, Esq. and our team focus on building plans that protect benefits today and provide for your loved one long after you are gone.
Ready to protect someone you love? Schedule a consultation with Russel Morgan, Esq.
Frequently Asked Questions
Will a Special Needs Trust cause my child to lose Medicaid or SSI?
No — that is the entire point of a properly drafted SNT under EPTL § 7-1.12. Because the beneficiary does not own or control the assets, the trust funds are not counted against means-tested limits. The danger comes from leaving money outright instead of through the trust, or from a poorly drafted document.
What is the difference between a first-party and third-party SNT?
A first-party SNT holds the disabled person’s own money (such as a settlement) and requires Medicaid payback to the state at death. A third-party SNT holds money from a parent or relative, has no payback requirement, and lets you direct any remaining funds to other heirs.
Can the trustee give the beneficiary cash?
Cash handed directly to the beneficiary, and certain payments for food and shelter, can reduce SSI and must be handled carefully. Instead, a trustee typically pays third parties directly for approved items like education, travel, therapy, and personal needs.
Who should I name as trustee?
A trustee is a fiduciary held to the prudent-investor standard (EPTL Article 11-A), a duty of loyalty, and a duty to account. Choose someone trustworthy who understands benefit rules — often a knowledgeable family member, a professional trustee, or both working together.
Do I still need a will if I set up an SNT?
Usually yes. A will and an SNT serve different functions. Remember that a will is public and must be probated in Surrogate’s Court, while trusts stay private and avoid probate. Many plans combine a will, a living trust, and an SNT to cover every scenario.
This article provides general information about New York law and is not legal advice. For guidance on your specific situation, consult a qualified New York estate-planning attorney.
Further reading from Morgan Legal Group: how trusts work in New York.