Supplemental Needs Trust in Jeopardy

Inconsistent Terms in Will Lead to Hearing

A recent case from New York County Surrogates Court tells a cautionary tale about the problems that can occur if a Last Will and Testament is not drafted properly.

In the case of Matter of Romanello, 2014 NY Slip Op 31849(U) (Sup. Ct., New York County, July 17, 2014), Willam Romanello passed away and was survived by his six children. One of the children was a severely disabled adult. She could not speak or hear and had lived with her parents her entire life.

Mr. Romanello’s Will established a trust for the benefit of his disabled daughter and allowed the income and principal to be used for “maintenance, medical care and necessaries”. The Will referred to the trust as a “special need trust fund”.   The Executrix of the Estate was one of Mr. Romanello’s other daughters, and she argued that it was her father’s intent to establish a supplemental needs trust (“SNT”) for the benefit of her disabled sister.

A SNT, if properly established, would not affect the disabled daughter’s eligibility for governmental benefits. In this particular case, the disabled daughter was receiving Medicaid and Social Security Disability benefits.

In seeking to construe the meaning of the Will, the Court struggled with the language in the trust because on the one hand, the trust was referred to as a “special needs trust fund”, which would appear consistent with the establishment of a SNT.

On the other hand, the Court noted that income and principal could be used from the trust to pay for “maintenance, medical care and necessaries” for the disabled daughter. This was inconsistent with the creation of a SNT, because it would allow funds from the trust to be used for needs that were currently paid for by governmental programs. The Court explained that it is the purpose of a SNT to “supplement, not supplant, impair or diminish, government benefits”.

Based on this inconsistency, the Court directed a hearing to be held to determine the true intent of the decedent – Mr. Romanello. Depending on the outcome, Mr. Romanello’s disabled daughter faces the prospect of potentially losing her governmental benefits.

In order to avoid problems in the execution of your estate plan, make sure to seek assistance from experienced professionals in the field. The estate planning attorneys at O’Connell and Aronowitz are ready and able to assist you at the office nearest to you.