A special needs trust (also called a supplemental needs trust, or SNT) is a New York trust authorized by EPTL 7-1.12 that holds assets for a person with a disability without disqualifying that person from means-tested government benefits such as Medicaid and Supplemental Security Income (SSI). Because the funds are held and controlled by a trustee — not owned outright by the beneficiary — they do not count as the beneficiary’s resources, so the beneficiary keeps eligibility while the trust pays for “supplemental” needs the government does not cover. That single feature is what separates the SNT from every other trust in the EPTL toolbox, and it is why families planning for a disabled child, spouse, or relative cannot simply substitute a standard revocable or irrevocable trust.
This guide explains how the SNT works under New York law and, just as importantly, weighs it against the other main trust options so you can see which tool fits which goal.
Why a Special Needs Trust Is Different
Means-tested benefits have strict resource limits. If a disabled person inherits money outright — or receives a personal-injury settlement — that money typically pushes them over the limit and terminates Medicaid and SSI. The SNT solves this by placing assets under a trustee’s discretionary control. The beneficiary cannot demand distributions, so the assets are not counted, yet the trustee can spend trust funds to improve the beneficiary’s quality of life.
Trust funds are meant to supplement, not replace public benefits. Properly drafted, an SNT can pay for:
- Therapies, medical and dental care not covered by Medicaid
- Education, job training, and assistive technology
- Travel, recreation, and companionship
- Furniture, electronics, and home modifications
- A vehicle or transportation costs
What the trustee should avoid is paying directly for food or shelter in ways that reduce SSI — a nuance that makes professional drafting and administration essential.
First-Party vs. Third-Party SNTs
There are two broad categories of special needs trust in New York:
- Third-party SNT — funded with someone else’s money (for example, a parent leaving an inheritance to a disabled child). There is generally no Medicaid payback requirement; whatever remains can pass to other family members.
- First-party (self-settled) SNT — funded with the beneficiary’s own assets, often a lawsuit settlement or direct inheritance. New York and federal rules typically require a Medicaid “payback” provision, meaning the state is reimbursed from what remains at the beneficiary’s death.
Choosing the wrong category — or omitting required language — can defeat the entire plan, which is why EPTL 7-1.12 drafting belongs with an experienced estate-planning attorney.
Special Needs Trust vs. the Other Main NY Trusts
A special needs trust is one option within New York’s EPTL Article 7 trust framework. Comparing it side by side with the other workhorses shows when each is the right choice.
| Feature | Special Needs Trust (EPTL 7-1.12) | Revocable Living Trust | Irrevocable Trust |
|---|---|---|---|
| Grantor keeps control? | No — trustee discretion is the point | Yes — amend or revoke anytime | Generally no |
| Primary purpose | Preserve Medicaid/SSI for a disabled beneficiary | Avoid probate, privacy, incapacity management | Estate-tax reduction, asset protection, Medicaid planning |
| Protects means-tested benefits? | Yes | No | Sometimes (if structured for that goal) |
| Saves NY estate tax? | Depends on structure | No — assets stay in taxable estate | Often yes |
| Medicaid look-back? | N/A for benefit-preservation | N/A | 5-year look-back applies |
| Avoids probate? | Yes | Yes | Yes |
A few takeaways from this comparison:
- A revocable living trust is excellent for avoiding probate, maintaining privacy, and managing assets if you become incapacitated — but it does not save estate tax and does not shield a disabled beneficiary’s benefits, because the grantor retains full control.
- An irrevocable trust is the tool for estate-tax reduction, asset protection, and Medicaid planning, but it is subject to the 5-year Medicaid look-back and generally cannot be amended.
- The special needs trust is purpose-built: its entire value is benefit preservation under EPTL 7-1.12, something neither of the other two reliably accomplishes on its own.
In many family plans these are not either/or choices. Parents frequently create a revocable living trust for their own assets and direct that any share for a disabled child flows into a third-party SNT at their death. To see how the categories fit together, review our trusts overview.
How an SNT Fits Into Your Estate Plan
Because a will is public and must be probated in the Surrogate’s Court, while a trust is private and avoids probate, many New Yorkers build their plan around trusts. For a deeper comparison, see our guide on trust vs. will.
It is also worth knowing where the SNT sits relative to New York’s estate tax. For 2026, the New York basic exclusion amount is $7,350,000, with a notorious “cliff” at 105% — $7,717,500. Estates that exceed the cliff lose the entire exemption, not just the excess. While the typical SNT is about benefit preservation rather than tax savings, wealthier families often pair it with tax-driven planning, making coordinated drafting valuable.
The Trustee’s Role
The trustee of an SNT carries real fiduciary weight. Under New York law a trustee must follow the prudent-investor standard (EPTL Article 11-A), observe the duty of loyalty, and satisfy the duty to account to beneficiaries. For an SNT specifically, the trustee must also understand benefit rules well enough to make distributions that help the beneficiary without jeopardizing eligibility. New York’s SCPA and EPTL provide statutory commission schedules that govern trustee compensation. Ongoing oversight matters, which is why families often engage counsel for trust administration.
Frequently Asked Questions
Will a special needs trust make my child lose Medicaid or SSI?
No — that is precisely what it prevents. A properly drafted SNT under EPTL 7-1.12 keeps assets out of the beneficiary’s countable resources so means-tested benefits continue.
Can I just use a revocable living trust instead?
No. A revocable trust leaves you in control and the assets countable, so it will not protect benefits. It is a great probate-avoidance tool, but it is the wrong instrument for a disabled beneficiary.
Does the state get the money back when the beneficiary dies?
It depends. A third-party SNT funded with someone else’s money generally has no Medicaid payback. A first-party SNT funded with the beneficiary’s own assets typically requires a Medicaid payback provision.
Who should serve as trustee?
Someone — often a professional or institution — who understands both fiduciary duties under EPTL Article 11-A and the benefit rules. Poor distribution decisions can cost the beneficiary their benefits, so experience matters.
Talk to a New York Trusts Attorney
A special needs trust is a precise legal instrument, and small drafting choices have large consequences for your loved one’s benefits and security. The attorneys at Morgan Legal Group, led by Russel Morgan, Esq., design SNTs and coordinate them with the rest of your estate plan across New York State.
Schedule your consultation with Russel Morgan, Esq. to protect your family’s future.
Further reading from Morgan Legal Group: how trusts work in New York.