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Recent Decision for 3rd Party Supplemental Needs Trust

There has been a recent decision from New York that discusses the ability to decant into a third party supplemental needs trust under New York law, specifically EPTL 10-6.6.  The full citation for the case is, In the Matter of the Application of Alan D. Kross (N.Y.Surr.Ct. (Nassau Cty.), No. 2012-369907, Sept. 30, 2013) and a copy of the opinion is provided here
 
Daniel Schreiber is the beneficiary of the trust in question.  Daniel’s grandfather drafted the trust in 1992, and passed away in 2008, at which time Daniel’s trust was funded, and Rachel Schreiber and Alan Kroll began managing the trust as trustees.
 
At the time the trust was drafted, Daniel was 19 months old and exhibited no signs of a disability.   However, Daniel, age 21, now suffers from several disabilities and is receiving SSI and Medicaid benefits.
 
Under the terms of the original trust, Daniel was to receive discretionary distributions of income and principal until age 21.  Once he reached age 21, he was entitled to mandatory income distributions paid at least quarterly, half of the principal at age 25, half of the remaining principal at age 30, and the balance of the trust assets at age 35.
 
To avoid disqualifying Daniel from Medicaid and/or SSI benefits, the trustees filed a petition with the court asking for approval of the trustees appointing the original trust assets into a new third party supplemental needs trust.  The actual transfer of assets (decanting) into the third party supplemental needs trust occurred before Daniel’s 21st birthday, and was approved by Daniel’s father.
 
The Court analyzed the transactions according to EPTL 10-6.6(s), and found as follows:
 
“(1) the trustees of the invaded trust are "authorized trustees" within the meaning of EPTL 10-6.6(s);
(2) the trustees complied with all statutory requirements for the effective exercise of the power of appointment contained in the invaded trust;
(3) the execution by Richard Schreiber of the Consent Regarding Effective Date of Exercise of Power of Appointment to Decant was effective to shorten the otherwise-applicable 30-day notice period; the decanting of the trust assets from the invaded trust to the appointed trust was effective May 2, 2012, prior to Daniel attaining the age of 21; the appointed trust is therefore a third-party supplemental needs trust; and there is, therefore, no requirement of a payback provision in the appointed trust.”
 
We hope you find this analysis helpful.
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