New York Supplemental / Special Needs Trust: Be Careful Of Medicaid’s Five Year Look Back Period

A supplemental or special needs trust is designed to either provide additional income for a special child or an individual who has special needs, according to Elliot Schlissel, a New York estate lawyer who has been assisting clients for over 30 years in the New York metropolitan area and in Long Island’s Nassau and Suffolk counties. He says that, while these types of trusts can be beneficial, it’s important to remember that Medicaid has a five year look back period.

Creating a special needs trust

Special needs trusts (SNT) usually involve individuals receiving Social Security Disability (SSD) or Medicaid, according to Schlissel. He explained:

Those programs have restrictions as to how much income or assets an individual can have, so you can’t give the recipients any assets through inheritance or gifts. If you were to give them assets, they would be forfeited to Medicaid or it would cause them to lose their Medicaid medical benefits or benefits under SSD.

If someone has a child with special needs and they’re doing estate planning, they put in their will, or in what’s called an inter vivos trust, something called a special needs or supplemental needs trust. This sets up the trust, which is basically an artificial device designed to hold money. They put assets in the trust and a trustee is appointed to supervise providing benefits to the individual with special needs. When the individual with special needs passes, the trust has provisions as to who will inherit the balance of the funds, if any exist.

Medicaid’s five year look back period

One of the most basic misconceptions people have about special needs trusts concerns Medicaid’s five year look back period. Schlissel explained:

People often say to me, “Well I’m going to give the deed of my house over to my children and put my money in their name, so, therefore, I will have no assets and then I’ll qualify.” That doesn’t make you qualify. Medicaid looks back for five years. There are some planning devices which allow you to save about half of your assets if you are within that five year period. However, they are very sophisticated and sometimes people don’t want to give up their assets. You have to become poor on paper to qualify for Medicaid.

Contact an experienced wills and probate lawyer to discuss whether a special needs trust is right for you.