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New Jersey Special Needs Trust Attorney

Special Needs Trust

If you have a child with a disability, you may find long-term financial planning tough to imagine, given day-to-day medical needs, education concerns, and other issues.

One way to provide for your child years from now is through a Special Needs Trust (SNT). You can establish and fund an SNT before your child turns 65 and have peace of mind knowing that the assets in the trust won’t disqualify your child from receiving Medicaid, Supplemental Security Income (SSI), and other government benefits.

Contact the Susan Clark Law Group LLC now for a free consultation to discuss how an SNT could help you plan for your child’s future.

What Is a Special Needs Trust?

Also called a “supplemental needs trust,” an SNT is a type of trust that preserves a person’s eligibility for benefits programs for which they could be disqualified for having a certain income or amount of assets.

For instance, SSI provides cash to aged, blind, and disabled people who have little or no income so they can pay for basics such as food, shelter, and clothing. The program specifies that a recipient cannot have more than $2,000 in a bank account at any one time. A lump-sum inheritance could cancel this benefit to which your child would otherwise be entitled.

As long as an SNT is properly drafted and administered, federal and state law holds that any funds in this trust do not count toward a person’s eligibility for SSI, Medicaid, and other government programs.

An SNT is meant to supplement, not supplant, any other assistance and is designed solely for the benefit of the beneficiary. Because of this designation, an SNT also is a good financial management tool if your adult child cannot manage expenses or is susceptible to someone taking advantage of them.

Types of Special Needs Trusts

All SNTs benefit an individual with a disability, but these trusts have different classifications depending on the type of asset and management. For most families, a first-party SNT or a third-party SNT will be the option to explore.

  • A first-party trust typically is established when a person with a disability has or is expected to have assets such as an inheritance or a settlement from a lawsuit or a divorce. When the beneficiary dies, any leftover funds revert back to the government.
  • A third-party trust typically is designed as part of a donor’s estate plan, so the funds never belong to a beneficiary and do not have to be reimbursed to the government upon the beneficiary’s death. These trusts can own real estate or investments and receive the payout of life insurance policies.
  • A pooled trust contains the assets of a person with a disability but is established and managed by a nonprofit association. A pooled trust contains accounts for each separate beneficiary. It pools the funds from those accounts for investment and management purposes.

What to Consider When Setting Up a Special Needs Trust

Regardless of the type of trust, the NJ Division of Medical Assistance and Health Services (DMAHS) specifies that only a parent, grandparent, guardian, or the court itself can establish an SNT. Such trusts must be irrevocable, meaning they cannot in any way be revoked by the grantor or donor.

When establishing such a trust, you’ll need to consider the beneficiary’s age, the type of assets the beneficiary has or is expected to have, and who will manage the trust if you or your child cannot.

SNTs must be established and funded before an individual with a disability reaches age 65. If the beneficiary is a minor (under age 18) when the trust is established, the state says that the trustee shall execute a bond to protect the child’s funds or shall get a court’s permission not to do so.

The trust also must state whether a beneficiary who is a minor is expected to be competent once he or she reaches adulthood.

The trust may be used to pay “appropriate and reasonable trust fees” consistent with state law.

Also, the trustee must provide annual accounting of the trust to the DMAHS, which is part of the NJ Department of Human Services.

What to Consider When Choosing a Trustee

Choosing a trustee is a serious matter because of the huge responsibility a trustee has. A trustee effectively manages the money or assets that you’ve set aside in the trust, so it’s crucial to choose someone who is comfortable with this role and dealing with financial matters.

You’ll also want to select someone who has your child’s best interests at heart, especially if he or she will manage the trust after your death.

Anyone over the age of 18 can be a trustee, according to the Society of Trust and Estate Practitioners (STEP), a global professional organization of these professionals. You can appoint yourself and your spouse or partner trustees during your lifetime.

However, if you or a trusted relative or friend is unfamiliar with the obligations of the role of trustee — or doesn’t want to shoulder this responsibility — you can find a professional trustee in your area.

You can consult with a reliable NJ special needs trust lawyer, such as the attorneys at the Susan Clark Law Group LLC, about choosing a trustee.

How Special Needs Trust Funds Can Be Spent

A good rule of thumb is that funds from an SNT should not be used to pay for expenses that another benefit might cover. Most people automatically think of using the trust for medical expenses, but if the beneficiary receives Medicaid, the state advises consulting their managed care plan first before paying for medical care that might be covered and causing an inappropriate disbursement of income.

Likewise, if the beneficiary receives SSI, the trust should not be used to pay for basic expenses that SSI covers, such as:

  • Groceries or food
  • Rent or mortgage payments
  • Property taxes
  • Homeowners’ or condo association dues
  • Utilities such as gas, water, and electricity

So what’s left? A trustee can distribute SNT funds to pay for a beneficiary’s education, vacation, hobbies, and any other expenses not covered by other benefits. A special needs trust lawyer can advise you in more detail about which expenses qualify for payment from a trust.

How a Special Needs Trust Lawyer Can Help You

At the Susan Clark Law Group LLC, we have personal experience with the legal operation of trusts. We can answer any questions you have about providing for your loved one’s future financial security.

If you or another relative wants to establish a special needs trust for an individual in your family with a disability, or if you need guidance on choosing a trustee, we’re here to assist you. We not only have more than 100 years of combined litigation experience but have advocated for our own family members with disabilities.

Please call us today for a free consultation to discuss your concerns and gain the information and peace of mind you need regarding your child’s finances.

 

Special Trust Needs FAQs

Special Needs Trust FAQs

What is a Special Needs Trust?

Also called a “supplemental needs trust,” an SNT is a type of trust that preserves a person’s eligibility for benefits programs for which they could be disqualified for having a certain income or amount of assets.

What types of Special Needs Trusts are available?

All SNTs have different classifications depending on the type of asset and management.

For most families, a first-party SNT or a third-party SNT will be the option to explore.

  • first-party trust 
  • third-party trust 
  • pooled trust

Call us today for a free consultation.

How can I fund a special needs trust?

A special needs trust is funded using: 

  • Life insurance 
  • Cash (including gifts from relatives) 
  • Investments
  • Retirement plan benefits
  • Personal and real property
  • Proceeds from a personal injury settlement

What are the requirements for a special needs trust?

Only a parent, grandparent, guardian, or the court itself can establish an SNT. Such trusts must be irrevocable, meaning they cannot in any way be revoked by the grantor or donor.

When establishing such a trust, you’ll need to consider the beneficiary’s age, the type of assets the beneficiary has or is expected to have, and who will manage the trust if you or your child cannot.

How do I choose a trustee?

A trustee effectively manages the money or assets that you’ve set aside in the trust, so it’s crucial to choose someone who is comfortable with this role and dealing with financial matters.

You’ll also want to select someone who has your child’s best interests at heart, especially if he or she will manage the trust after your death.

Our NJ Location To Meet You

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