One of the things that often incentivizes people to put an estate plan in place is having a loved one with a disability. Establishing a special needs trust (SNT) – sometimes referred to as a supplemental needs trust – can give you peace of mind that if you’re ever unable to care for that loved one – whether because of incapacitation or death – he or she will be cared for and financially protected.
A SNT also provides important benefits for your loved one while you’re still around. One of the key benefits of this kind of trust is that it allows a disabled person to receive whatever you can provide for them to make their life more comfortable and fulfilling without giving up government benefits like Medicaid and Supplemental Security Income (SSI) which they may qualify for. It also allows them to inherit money via the trust, and other assets without losing those benefits.
It must be valid under federal and state law
A SNT needs to be established and maintained correctly under both federal law and New Jersey state law. For example, the disabled person must be the beneficiary of the trust, but not have direct access to the assets in it. Under federal law, they must meet the Social Security Administration (SSA) requirements for disability. They must also be under 65 years of age.
In addition to these requirements, New Jersey law has requirements for an SNT that include the following:
- It must be established by the disabled person’s parent, grandparent, guardian or a court.
- It must be irrevocable.
- The assets in it must be used solely for the disabled person’s benefit.
When the beneficiary passes away, the state is considered the “first remainder beneficiary.” That means it is entitled to be paid back for any Medicaid benefits the beneficiary received that haven’t already been reimbursed or recovered.
This is simply a brief overview of SNTs in New Jersey. There’s a lot more to know. Further, each SNT will be somewhat unique to the beneficiary and those who care for them. That’s why having experienced legal guidance is key to establishing and maintaining this kind of trust.
If you would like more information regarding SNT’s please contact our estate planning and administration partner, Michelle E. Smith, Esq.