Creating special needs trust is a powerful tool. Many children with special needs are eligible for supplemental security income (SSI), Medicaid, and even subsidized housing. These programs provide excellent resources for your child with special needs.
A special needs trust allows you to pass down your assets without disqualifying your loved one from the benefits they depend on. Some individuals with special needs might not qualify for SSI or Medicaid but still require assistance due to their disabilities. In such cases, it’s crucial to work with a skilled New Jersey special needs trust attorney who can help you create a trust tailored to your loved one’s unique needs. At Matus Law Group, our experienced team can help you overcome the challenges of raising a child with special needs. Contact us today at (732) 785-4453 to learn more about how a special needs trust can secure your loved one’s future while preserving their access to essential benefits.
Discretionary Trusts Explained
With a discretionary trust, the trustee has the freedom to manage the trust at their own discretion, including selecting beneficiaries and determining when to release funds. While the trustee may use their judgment to choose beneficiaries, they must still follow the settlor’s wishes in managing the trust.
In addition to this, a discretionary trust can safeguard family assets from being divided in divorce settlements. The trustee can modify the beneficiary selection and asset distribution as needed to shield the trust’s assets. Although a trust cannot be utilized to conceal assets from creditors, establishing one can offer protection for beneficiaries. Furthermore, a discretionary trust can assist young beneficiaries in managing their funds, as the trustee has the authority to control and safeguard the funds if the beneficiary is unable to do so.
An experienced New Jersey discretionary trust lawyer can help ensure that the trust is set up correctly and that the trustee follows the legal guidelines for managing the trust. At Matus Law Group, our team of skilled NJ discretionary support attorneys may be able to provide ongoing advice and assistance to ensure that the trust remains in compliance with the law and that the beneficiaries receive the maximum benefit from the trust over time. Call us at (732) 785-4453 to learn more.
Discretionary Support Trust
A discretionary support trust, for instance, still allows for a trustee to disperse supplemental income to your chosen beneficiaries. But this type of trust gives the trustee an additional level of flexibility in disseminating funds to your child.
It is important to note that a beneficiary’s access to money is either mandatory or discretionary for trusts. When a trust is mandatory, the beneficiary can request money from the trustee, and the trustee is required to issue those funds. With a discretionary trust, the trustee has the choice of whether to give the funds.
That is particularly important when it comes to some people who possess special needs. The trustee can continue to look out for their best interests. Choosing the right trustee to assist with your special needs child is of vital importance.
Benefits
Recall how a special needs trust could be used in conjunction with someone receiving benefits such as SSI or Medicaid. The trustee needs to be diligent because there are such things as countable resources. People who receive SSI must have $2000 or less of countable resources.
If the beneficiary (special needs child) has more than $2000 in their bank account (or in cash) or spends more than that on meals or property taxes, for example, they could no longer be eligible for SSI.
If the special needs child is not receiving SSI, the trustee is not beholden to that $2000 limit. This frees up the trustee to pay for rent, and mortgage, and even make investments that exceed $2000.
When you build your estate plan and utilize a discretionary trust, you can still identify which things the trustee has to pay for. For example, you could set a minimum allowance that your beneficiary can receive to support their living expenses.
What Are the Downsides of a Discretionary Trust?
Discretionary trusts, while offering flexibility and potential tax benefits, come with several significant drawbacks that need careful consideration. Understanding these downsides is crucial for anyone considering setting one up.
Complex Management: Trusts are inherently complex structures. If professional trustees are not appointed, lay trustees or a non-professional trustee, must navigate intricate trust and tax laws and manage the trust’s assets. This responsibility includes making decisions on how the trust’s benefits are distributed among beneficiaries. The complexity of this process can be overwhelming for those without legal or financial experience.
Potential Beneficiary Discontent: Not all potential beneficiaries are guaranteed to benefit from a discretionary trust. Since the distribution of benefits is left to the trustees’ discretion, some intended beneficiaries may receive less than expected or nothing at all. This situation can lead to feelings of grievance and discontent among those who feel left out or unfairly treated.
Trust and Control Issues: A significant amount of trust is placed in the trustees to act in accordance with the settlor’s wishes. However, trustees have the power to disregard these wishes, leading to a potential loss of control for the settlor. The settlor must have complete confidence in the trustees’ judgment and integrity.
Costly to Maintain: Establishing and maintaining a trust can be expensive. Professional trustee services, legal fees, and ongoing management costs can add up, making trusts a costly option. These expenses can sometimes outweigh the financial benefits that the trust aims to provide.
Tax Implications: While discretionary trusts can reduce the settlor’s tax burden, they can impose other tax obligations on the trustees and beneficiaries. The tax landscape for trusts is complex and can result in unexpected liabilities, making it crucial to seek professional advice.
When considering setting up a discretionary trust, it’s essential to weigh the potential drawbacks carefully. Understanding both the advantages and disadvantages will help you determine if a discretionary trust aligns with your financial and familial goals. For more detailed insights and guidance, consider consulting with a New Jersey estate planning attorney from The Matus Law Group today.
| Aspect | Discretionary Trust | Mandatory Trust |
|---|---|---|
| Beneficiary’s Access to Funds | Trustee has the discretion to decide if and when to distribute funds. | Beneficiary can request funds at any time, and the trustee must comply. |
| Trustee’s Role | Trustee has flexibility in managing and distributing the trust’s assets. | Trustee must follow the terms of the trust without flexibility. |
| Special Needs Consideration | Allows trustee to make decisions based on the beneficiary’s changing needs and best interests. | May not be ideal for special needs beneficiaries due to rigid distribution rules. |
Matus Law Group
The Matus Law Group was built around compassion and understanding for special needs families. We know how much you want your child to have a fulfilling life, and we can help you create an estate plan with that in mind. If you have any further questions or would like to speak to a professional New Jersey estate planning attorney, contact us at (732) 785-4453 to schedule a consultation.
