Glossary

Terms to Know

Beneficiary: For purposes of a supplemental needs trust, the person with a disability for whose benefit a trust or insurance policy has been established. The beneficiary must have a diagnosis of intellectual, developmental or other disability for purposes of eligibility to the unrestricted fund.

Corpus: Corpus is Latin for body, but here it means the money, bonds, stocks, life insurance policies or whatever else you wish to give to a trustee for the benefit of the beneficiary.

Developmental Disabilities: A condition that causes a person to have an impaired ability to understand and appreciate the nature and consequences of decisions, which result in such person being incapable of managing himself or herself or his or her affairs and whose condition is permanent or likely to continue indefinitely. In New York State, a developmental disability:

  • Is attributable to cerebral palsy, epilepsy, neurological impairment, autism or traumatic head injury.
  • Is attributable to any other condition closely related to I/DD because such condition results in similar impairment of general intellectual functioning or adaptive behavior.
  • Is attributable to dyslexia resulting from a disability described above or from I/DD.
  • Must originate before such person attains age 22 or via traumatic head injury.

Disabled: See Social Security Law Section 1614(a)(3) [42 USC §1382c(a)(3)] The term “disability” as it applies here is defined in Section 223(d)(1) of the Social Security Act (42 U.S.C. Section 423(d)) to mean:

(1)(A) … inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment, which can be expected to result in death or, which has lasted or can be expected to last for a continuous period of not less than 12 months…

(2)(A) For purposes of paragraph (1)(A)—an individual… shall be determined to be under a disability only if his physical or mental impairment or impairments are of such severity that he is not only unable to do his previous work but cannot, considering his age, education and work experience, engage in any other kind of substantial gainful work, which exists in the national economy, regardless of whether such work exists in the immediate area in which he lives, or whether a specific job vacancy exists for him, or whether he would be hired if he applied for work.

Section 223(d)(3) of the Act (42 U.S.C. Section 423(d)(3) provides:

(3) For purposes of this subsection, a “physical or mental impairment” is an impairment that results from anatomical, physiological or psychological abnormalities, which are demonstrable by medically acceptable clinical and laboratory diagnostic techniques.

(5) An individual shall not be considered to be under a disability unless he furnishes such medical and other evidence of the existence thereof as the secretary may require.

Discretionary Powers: Powers that provide a trustee many options in managing a trust’s assets and in adapting the benefits furnished to the beneficiary in order to accommodate varying situations.

Fiduciary: A general term for a person or institution that manages money or property for another, and who must exercise a standard of care in such management activity that is imposed by law or contract (i.e., a trustee).

Inter Vivos Trust: A trust established by a person that become effective during his or her lifetime.

Intestate: A legal term used to describe when an individual dies without leaving a valid will. If a person dies without a will, state law will provide for the distribution of his/her assets.

Irrevocable Trust: A trust that the sponsor or grantor cannot terminate after it has been created.

Joinder Agreement: The legal document that is executed by the grantor to establish an account with certain pooled or community-type supplemental needs trusts.

New York State Estates, Powers & Trusts Laws, (“EPTL”) 7-1.12 authorizes that a third party can establish an inter vivos or testamentary supplemental needs trust for the benefit of a person with a severe and chronic or persistent disability whose disability is expected to, or does require, long-term specialized services.

OBRA ’93: The Omnibus Budget Reconciliation Act of 1993. It authorized the establishment of certain types of supplemental needs trusts, including pooled trusts, which are managed by nonprofit corporations for the benefit of individuals with disabilities.

Payback Trust: A trust permitted by federal law that enables a disabled beneficiary, under age 65, to protect his or her own assets by transferring them to a supplemental needs trust and still qualify for governmental benefits, such as SSI or Medicaid. Upon the death of the beneficiary, the state has the right to be reimbursed for the amount of correctly paid Medicaid benefits on behalf of the beneficiary. Any remaining trust assets in excess of the payback amount may be distributed as designated where the trust is set up.

Pooled Trust: A pooled trust is established and managed by nonprofit associations. Separate accounts for each beneficiary are maintained, but the funds are pooled for investment purposes.

Remainderman: The person or entity that is designated to receive the remaining assets of a trust at the trust’s termination.

Self Settled Trust: A type of supplemental needs trust. An inter vivos by which the beneficiary’s own assets are used to fund the trust. Typically the money used to fund the trust is received by a person with a disability as a result of a court order, inheritance, life insurance payout, a medical malpractice or personal injury action. This type of trust is established for the benefit of an individual with disabilities and is funded by that person‘s own assets. This is commonly referred to as a payback, self-settled or OBRA trust having been authorized by the Omnibus Budget Reconciliation Act of 1993. Social Security Law Section 1614(a)(3) [42 USC §1382c(a)(3)]: This is the section of federal law that essentially defines disabled. To summarize, a person is disabled under this law if, because of an anatomical, physiological or psychological abnormality that will last more than 12 months or will lead to eventual death, and which prevents that person from holding employment. It covers physical, intellectual and developmental disabilities. Sponsor (or grantor or settlor) is the person who creates the trust.

Supplemental Needs Trust (Special Needs Trust or SNT): A trust that provides funds to a fiduciary for the benefit of a person with a disability. The assets of a supplemental needs trust are not considered as available assets or resources for the purpose of determining whether a person shall be eligible to receive governmental benefits. An SNT may be funded by a third party, such as a parent, grandparent, friend or relative. This type of trust is commonly referred to as a Third Party Trust. An SNT may also be established using the funds of the beneficiary with a disability (see Self Settled). SNT funds are intended to supplement—not replace—governmental benefits programs such as Medicaid and SSI. An SNT enhances the beneficiary’s quality of life through the purchase of additional support services, social and recreational opportunities, advocacy, guardianship and medical services and equipment that are not otherwise covered or adequately provided through state and federal benefit programs.

Surplus or Excess Income Trust: A pooled trust account, managed by a not-for-profit organization to hold monthly excess income that is above the maximum limits for those who need to qualify for Medicaid. This trust can be utilized by older adults and seniors receiving Social Security and/or retirement benefits over and above Medicaid income limits to qualify for care at home through Medicaid managed care programs. The funds in this trust are used to pay monthly household expenses for the person with the disability, enabling them to remain at home for as long as possible.

Testamentary Trust: A trust established under a will. Trust: A legal device created by a person, called the settlor, grantor or donor, who places money or other property in the hands of another party (the fiduciary). The money or property can be used only for the benefit of the beneficiary.

Trustee: Person or a legally established entity that has legal title to property, holds it in trust for the benefit of another and owes a fiduciary duty to the beneficiary to follow the terms of the trust and applicable state law. A breach of fiduciary responsibility would make the trustee liable to the beneficiaries for damage caused by the breach.