A New York Surrogate's Court approves a trustee's petition to decant a trust established for a child who later developed disabilities into a third-party special needs trust prior to the child's 21st birthday, allowing the child to remain eligible for SSI and Medicaid. In The Matter of the Application of Alan D. Kross (N.Y.Surr.Ct. (Nassau Cty.), No. 2012-369907, Sept. 30, 2013).
In 1992, Moses Ratowsky created a trust for the benefit of his grandson, Daniel Schreiber. The trust stated, among other provisions, that Daniel could withdraw any and all of the trust principal once he turned 21. When the trust was created, Daniel did not show symptoms of having a disability, but as time went on he developed one, so that by the time he turned 21 he was receiving Medicaid and Supplemental Security Income (SSI).
One week before Daniel turned 21, the trustees of the original trust created by Mr. Ratowsky transferred all of the trust's assets into a third-party special needs trust for Daniel's benefit. Daniel's father, acting pursuant to a provision in the original trust that allowed a beneficiary's parent to act on behalf of a beneficiary with a disability, consented to the transfer, thus overriding a New York statute that makes a decanting effective 30 days after the trustees give the beneficiary notice that the trust is being invaded. When one of the trustees subsequently petitioned the court to approve the decanting that had already taken place, the state Medicaid agency objected, complaining that the trustees were not authorized to make the transfer and that the new trust should have contained a payback provision.
The New York Surrogate's Court, Nassau County, approves the decanting into the third-party special needs trust. The court explains that "(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 [Daniel's father] of the Consent . . . 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 . . . 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 . . . "
Note: Although the case name references the application of "Alan D. Kross," the body of the opinion itself identifies him as "Alan D. Kroll," which appears to be correct.
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