Many New Jersey families have one or more members who are disabled according to the criteria established by the Social Security Administration. Both the Federal government and the state of New Jersey have established financial assistance programs for these disabled individuals. However, to qualify for many of these programs, the applicant must have income and assets that do not exceed the limits established by the program in question.
State and federal legislation
To avoid using private assets to pay for the same goods and services as provided by the various disability income plans, the states, working in cooperation with Congress, have created an estate planning device that certain relatives of a disabled person to set funds aside in a specialized trust without violating the income or asset limitations on the federal and state assistance plans. These trusts are called “Special Needs Trusts” (SNTs), and they must meet certain requirements.
The trust must be irrevocable and must have as its only beneficiary the disabled family member. The beneficiary must also have been determined to be disabled under SSA regulations. Upon the beneficiary’s death, the trust assets are used to reimburse the state and Medicaid for payments made on behalf of the beneficiary. The trust instrument must be submitted to the State of New Jersey for approval before the trust becomes effective.
The trust document must state that trust assets can only be used to pay for healthcare, housing, clothing and food for the beneficiary. Because the beneficiary does not own the assets in the SNT, the beneficiary will remain eligible for benefits from Medicaid and Supplemental Security Income. In other words, the creation of an SNT opens the door for the beneficiary to receive the significant financial benefits provided by the state and federal programs that disburse substantial assistance payments.
Anyone interested in creating an SNT may wish to seek advice from an experienced estate planning lawyer. A knowledgeable attorney will be able to draft a trust instrument that satisfies both state and federal law and accomplishes the goal of the person creating the trust.