If your disabled child or adult family member will rely on Medicaid and Supplemental Security Income (SSI) for his or her long-term care, you must take steps to provide for him or her. Establishing a supplemental needs trust is one way you can do this while preserving eligibility for government assistance.
A supplemental needs trust allows you to transfer assets into a fund that is managed by a trustee. These assets are then used for your loved one’s supplemental needs beyond what is provided by the state. However, the trustee must carefully manage these assets to ensure that they do not jeopardize the beneficiary’s access to government assistance.
There are two main types of special needs trusts: third party and first party. A third party SNT is funded with assets that do not belong to the beneficiary, such as gifts from relatives or proceeds from life insurance policies. This type of trust does not create a payback requirement at the death of the beneficiary. First party SNTs are often set up when a disabled person receives a settlement from a personal injury lawsuit or an unplanned inheritance from a relative.
First party and third party SNTs are generally administered by the same professional trustee. This is typically a bank or other financial institution, but it can also be a non-profit organization. This trustee monitors the beneficiary’s financial requests and prepares distributions from the SNT. They also make investments in the trust funds on behalf of the beneficiary. In addition, this trustee must notify the state of the existence of the trust and any expenditures that would jeopardize the beneficiary’s means-tested benefits.
One of the major drawbacks of a supplemental needs trust is that it cannot be used to provide basic medical care and food. If you are planning to fund a supplemental needs trust with money from your estate, life insurance or other accounts, it is crucial that you consult an attorney who is familiar with this area of law.
It is also important to understand that a supplemental needs trust does not last forever. New treatments, therapies and technologies are constantly improving, and it is possible that your loved one’s condition may improve to the point where he or she no longer requires government assistance. At this point, it is possible that the trustee could terminate the trust if doing so is in the best interest of the beneficiary.
The trustee of a supplemental needs trust must be someone who is trustworthy and devoted to the beneficiary. This can be a family member, but it is more common for the trustee to be a professional fiduciary. Professionals such as attorneys, accountants, banks and investment firms can serve as trustees. They can be paid a fee for their services, but this can be waived by the beneficiary’s family members.
Establishing a Supplemental Needs Trust is an important part of estate planning for a disabled person. When done properly, it can allow a person with a disability to receive gifts, lawsuit settlements, or inheritances without jeopardizing their eligibility for government benefits such as SSI and Medicaid.
A qualified attorney who specializes in special needs estate planning can assist with establishing a supplemental needs trust, or an individual may wish to hire a professional trustee to administer the trust. A professional trustee monitors financial requests, prepares distributions, and hires a financial manager to invest the trust assets. The type of investments utilized depends on the size of the trust and the projected needs of the beneficiary.
Supplemental needs trusts are established by a parent, grandparent, guardian, or court, and the funds held within the trust are for the benefit of a person with a disability. A person must meet Social Security’s standards of disability to qualify for this type of trust. The trust must be irrevocable and the person who holds the assets cannot have direct access to them. This is why it is important to consult with a knowledgeable New Jersey special needs law firm to ensure the proper language is used in the trust document.
The assets in a supplemental needs trust can be used to pay for items that are not covered by means-tested public benefits programs such as recreational activities, vacations, and entertainment. A person may also be able to use the trust to purchase a vehicle, pay for transportation costs, and obtain a variety of medical treatments not covered by public assistance programs.
In order to preserve a beneficiary’s eligibility for Medicaid, the supplemental needs trust must be drafted correctly, and all assets must be placed in the trust prior to the beneficiary’s 65th birthday. This means that it is essential to plan ahead and discuss this with your family members so that they can contribute funds or place life insurance policies with the supplemental needs trust as a beneficiary before it is too late.
It is crucial to understand that if the trust is not drafted properly or the assets placed in it are not used according to state law, then the assets could be returned to the state of New Jersey for reimbursement for money paid on behalf of the beneficiary. This is why it is critical to work with a knowledgeable special needs law firm.
If you or a loved one has a disability, contact a qualified attorney to learn how you can set up a supplemental needs trust in New Jersey. They can prepare a supplemental needs trust document for your loved one, or help establish a sub-account in a pooled community trust. Call or email to schedule an appointment. Many firms offer free initial consultations for new clients. During the consultation, they will go over your options and explain how these legal services can help you plan for your future.
If a loved one is living with a severe disability, a Supplemental Needs Trust (SNT) can help preserve their financial security. However, it is essential to have an experienced lawyer draft and administer these complex trusts. A lawyer who is familiar with disability benefits can ensure that the trustee takes their responsibilities seriously and protects the disabled beneficiary.
SNTs are used to set aside assets without impacting a person’s eligibility for means-tested government programs such as Medicaid and SSI. It is possible to transfer a variety of assets into a supplemental needs trust including money, property, and valuables. The trustee is responsible for investing the trust’s assets and keeping careful records of the transactions. Depending on the trust’s provisions, assets can also be disbursed to beneficiaries directly as income or to pay for a wide range of items and services that are not available through means-tested programs.
A supplemental needs trust can be created by a parent, grandparent, legal guardian, or court. It can be funded with a bequest in a will or through gifts during life to the trust. A special needs attorney can advise on what types of assets may be useful for a particular beneficiary and how to best use them.
The trustee should be someone who is extremely trustworthy and able to manage the trust carefully. This is usually a relative, but it can be a professional fiduciary or trust company. In many cases, the same individual can serve as trustee along with a co-trustee. Trustees are required to file an annual accounting of the trust’s assets. This is a critical document for anyone who serves in this role, but it can be particularly difficult for beneficiaries.
When assets are left to a relative, they could become unavailable if that family member is involved in a divorce, sued for unpaid debts or dies. When a special needs trust is used, the funds cannot be affected by the actions of other family members.
An experienced New Jersey lawyer can help trustees understand the requirements for a supplemental needs trust and prepare appropriate documentation. They can also provide counsel on limiting tax liability and continuously review eligibility for government assistance programs. They can help trustees avoid any errors that could jeopardize a beneficiary’s financial stability.
If you have a family member who has a severe disability and requires ongoing support from governmental assistance programs, it is important to set up a supplemental needs trust. An experienced attorney from Matus Law Group can assist you in ensuring that your loved one receives the support they need while protecting their assets. Contact us today to discuss your needs and learn more about how a special needs trust can benefit you or your family. Our firm offers a free initial consultation.
The Matus Law Group
125 Half Mile Rd #201A, Red Bank, NJ 07701
(732) 785-4453