Planning for the future when caring for a loved one with special needs involves a delicate balance of providing support while maintaining their access to essential government benefits. In New Jersey, a Supplemental Needs Trust (SNT) offers a way to enhance the quality of life for individuals with disabilities. This trust serves as a financial bridge that extends beyond the limitations of public assistance, ensuring that additional care and resources are available without compromising the beneficiary’s eligibility for government programs. A discretionary support trust is another option, allowing a trustee to provide supplemental support at their discretion, ensuring the beneficiary’s needs are met while safeguarding their access to benefits.
Understanding the Supplemental Needs Trust is crucial, as the implications of such a legal arrangement can profoundly impact your loved one’s future. For families in New Jersey considering establishing an individual trust or exploring a pooled special needs trust, the assistance of a skilled attorney can provide clarity and peace of mind. At The Matus Law Group, our team of New Jersey special needs trust attorneys can guide you through the process, crafting a trust tailored to meet your family’s unique circumstances and goals. Contact us today at (732) 785-4453 to schedule a consultation.
What Is A Special Needs Trust?
In New Jersey, a Special Needs Trust is a legal arrangement that allows individuals with disabilities to receive assets without losing eligibility for government benefits like Medicaid or Supplemental Security Income (SSI). The trust manages funds for the beneficiary’s needs while preserving access to public assistance programs.
Also known as a Supplemental Needs Trust, an SNT is a trust created for the sole benefit of a disabled person before the age of 65. It can be established by the disabled individual’s parent, grandparent, legal guardian, or the court. Working with an attorney experienced in Special Needs Trusts can be essential to ensure that the trust is set up correctly, tailored to the individual’s needs, and compliant with both state and federal laws.
What Are The Conditions Of A Special Needs Trust?
Under the laws of New Jersey, an SNT must meet specific criteria. This includes, but not limited to the following:
- Trust has to contain the assets of an individual, including gifts.
- All deposits made to the trust must be done before the beneficiary turns 65
- The beneficiary must be disabled as defined by federal law under 42 U.S.C. 1382c(a)(3)
- The trust can only be for the sole benefit of its beneficiary.
- The New Jersey Medicaid program must be fully reimbursed for all the Medicaid payments received during the beneficiary’s lifetime.
| Conditions of a Special Needs Trust | Description |
|---|---|
| Trust Assets | Assets, including gifts, must be contained within the trust. |
| Deposits | All deposits must be made before the beneficiary turns 65. |
| Beneficiary Disability | The beneficiary must be disabled as defined by 42 U.S.C. 1382c(a)(3). |
| Sole Benefit | The trust can only be for the sole benefit of its beneficiary. |
| Medicaid Reimbursement | The New Jersey Medicaid program must be fully reimbursed for all Medicaid payments received. |
How to Fund a Supplemental Needs Trust in New Jersey
There are two common ways to fund a Supplemental Needs Trust (SNT) in New Jersey: using the beneficiary’s own assets or using assets from another individual. The funding method determines whether the trust is classified as a first-party or third-party SNT.
A first-party SNT, also known as a self-settled or (d)(4)(A) trust, is funded with the assets of the person who has the disability. This may include money from a personal injury settlement, a direct inheritance, or any other funds the beneficiary receives in their name. These trusts must follow strict federal and state guidelines, including the requirement that the state may recover Medicaid costs from the remaining funds upon the beneficiary’s death.
A third-party SNT is created and funded by someone other than the beneficiary. These trusts are often created by parents, grandparents, or other family members who want to provide future support without affecting the beneficiary’s eligibility for government programs. Common sources of funding include gifts, inheritances left directly to the trust, and life insurance policy proceeds directed to the trust as a beneficiary.
Both types of SNTs are designed to preserve eligibility for government programs like Medicaid and Supplemental Security Income (SSI) while providing additional resources to improve the beneficiary’s quality of life. Proper funding is essential to making the trust effective and compliant with legal requirements in New Jersey.
What a Special Needs Trust Can or Cannot Pay For
A Special Needs Trust (SNT) in New Jersey provides financial support to individuals with disabilities without affecting their eligibility for need-based government benefits like Medicaid and Supplemental Security Income (SSI). Knowing what these trusts can and cannot pay for is crucial for trustees and beneficiaries to manage funds appropriately and comply with legal requirements.
What an SNT Can Pay For:
SNTs are designed to cover expenses that improve the beneficiary’s quality of life beyond the basic needs met by government programs. These allowable expenditures include:
- Medical and dental care not covered by Medicaid, such as therapies or equipment.
- Insurance premiums for health, life, dental, and other types of insurance.
- Personal care attendants, vocational training, and educational programs.
- Transportation, including vehicle purchases or modifications for accessibility.
- Recreational activities like vacations and hobbies that enhance well-being.
- Home modifications for accessibility, such as ramps or bathroom fixtures.
- Equipment like wheelchairs, communication aids, or other assistive devices.
- Personal items like clothing, appliances, and furnishings that improve daily living.
- Legal and administrative fees related to trust management.
What an SNT Cannot Pay For:
Certain disbursements are restricted to preserve the beneficiary’s eligibility for benefits:
- Direct cash payments to the beneficiary are prohibited because they are treated as income, which can reduce SSI benefits dollar-for-dollar and affect Medicaid eligibility.
- Expenses for food, rent, mortgages, property taxes, and utilities may lead to a reduction in SSI benefits by up to one-third. While these expenses are not entirely prohibited, trustees should seek legal guidance before making such payments.
- Payments that violate the trust’s purpose or legal requirements, such as funding illegal activities or non-permitted uses, can result in penalties or disqualification from benefits.
Trustees are responsible for ensuring that all disbursements comply with the trust’s purpose and legal requirements. They must maintain detailed records, submit annual accountings to the Division of Medical Assistance and Health Services, and provide 45 days advance notice for any expenditure exceeding $5,000 to the New Jersey Bureau of Administrative Action and Recoveries. Staying informed about changes in laws and policies is essential to proper trust management.
Trustees can maintain the beneficiary’s eligibility for essential benefits while providing for additional needs that enhance their quality of life by adhering to these guidelines. Effective management ensures that the trust fulfills its intended purpose of supporting individuals with disabilities responsibly.
Are There Any Disadvantages Of A Special Needs Trust?
As is the case with arriving at a solution, no option is perfect. SNTs do present circumstances that should be carefully considered before being pursued. First, control of the trust lies squarely with the trustee and not the beneficiary. This limits the beneficiary’s independence, and they will have to rely on the trustee. Second, when the beneficiary dies, Medicaid must be fully repaid for the monetary assistance provided, which, for most people, means the trust’s funds will be completely depleted. Finally, the cost of setting up an SNT isn’t cheap and involves significant recurring fees.
Still, given what’s at stake, the advantages of an SNT will, in most cases, outweigh the drawbacks. Furthermore, the one thing that these trusts provide, which cannot be denied, is peace of mind. Knowing that your disabled loved one will be taken care of regardless of what happens to you is, in itself, enough reason to seriously consider creating an SNT.
Choosing a Trustee for a Special Needs Trust
The most important things to look for in a Supplemental Needs Trust or Special Needs Trust (SNT) trustee are that they should be trustworthy and intelligent. They should also be able to maintain good records and take their responsibilities seriously. The Matus Law Group has a team of experienced attorneys who may be able to help trustees properly manage the SNT. The responsibilities of being a trustee for SNT are very serious. If the trustee fails to properly administer the SNT, beneficiaries may lose their benefits or have to repay the government.
A Supplemental Needs Trust trustee must have great discretion. Keep in mind, that if a spouse or a beneficiary is named as the trustee, means-tested benefits may be jeopardized. On the other hand, as long as parents, children, and others are trustworthy and can manage finances, they could be good trustees.
Although a Special Needs Trust trustee can charge a fee, family members may waive this. The trustee may also hire accountants, lawyers, financial advisors, and other professionals on the trust’s behalf. A bank, lawyer, or any other professional may be the best choice to become a trustee in certain cases, especially when there are large trusts. Sometimes, trustees are also appointed by non-profit organizations.
Management of a large Special Needs Trust is an enormous responsibility, especially for a first-party SNT. It also carries significant obligations. Trustees must be wise investors, meet tax requirements, and comply with all laws regarding Medicaid or other means-tested benefits. Busy private individuals don’t always have the expertise and time to do this task, so if you are looking for a trustee of a large trust, a professional may be a better choice.
What Happens to a Special Needs Trust When the Beneficiary Turns 65?
When a special needs trust beneficiary turns 65 in New Jersey, the trust can continue operating if it complies with federal and state rules. However, no new assets can be added to a trust after the age of 65 without risking Medicaid eligibility. Existing funds remain protected if the trust was properly established.
This is a critical point: no additional assets from the beneficiary can be deposited into the trust once they reach this age milestone. These late contributions are considered an improper transfer of resources and can have negative consequences, potentially affecting the beneficiary’s eligibility for certain government benefits.
Additionally, all contributions to the trust must be completed before the beneficiary turns 65. This means that planning ahead is essential. Relatives, guardians, or the beneficiaries themselves should ensure that all intended assets are placed into the SNT well before their 65th birthday.
Work With a Top-Rated New Jersey Special Needs Trust Attorney at The Matus Law Group
Special Needs Trusts (SNTs) are an effective tool for families to assist adults with disabilities in streamlining their everyday living expenses and preserving vital sources of government assistance they receive. To determine whether an SNT is right for a member of your family, you should seek the services of a reputable New Jersey special needs trust attorney. Contact The Matus Law Group today at (732) 785-4453 to schedule an appointment.
