in Special Needs Trusts
To assist families in planning for their loved one’s future, the Trusts and Estates Group at Javerbaum Wurgaft offers expertise in estate planning, including special needs trusts for both individuals who have developmental disabilities or lifelong impairments and those who become disabled as the result of an accident or medical malpractice.
Special Needs Trusts for Individuals with Disabilities
Parents and guardians of children with developmental disabilities should understand the benefits of Special Needs Trusts. Government benefits, such as DDD services, Medicaid and Supplemental Security Income (SSI), are extremely important for people with developmental disabilities. They provide cash benefits, medical coverage, long-term supports and services for individuals with disabilities. Eligibility for these government benefits is based on several requirements, including that an individual’s personal assets not exceed $2,000.
However, government cash benefits are minimal, amounting to income less than the federal poverty level. They provide only for an individual’s most basic needs: food, clothing and shelter. Individuals with disabilities often have significant needs and parents planning for the future of their children with special needs want to provide their children with a full life beyond the bare necessities. This is especially important when considering estate planning. If parents, guardians or grandparents leave assets in their will directly to an individual who is receiving government benefits, they run the risk of disqualifying that individual from receiving future benefits. On the other hand, if they leave assets to a third party with direction that the assets be used on behalf of the disabled individual, they run the risk that the child might not receive the intended assets.
In response to these concerns, the government established rules for Special Needs Trusts. These rules allow assets to be held in trust for a recipient of benefits such as DDD Services, SSI benefits and Medicaid, without the individual losing their eligibility. For example, a provision of New Jersey Medicaid eligibility regulations allows individuals to exclude assets from the resource test only if those funds are in a Special Needs Trust. Therefore, a Special Needs Trust should contain the majority of the individual’s assets so that there is never more than $2,000 in the individual’s own name. In addition, a Special Needs Trust must be established and funded before the individual turns 65 years old, for the sole benefit of the individual with special needs, and once established, cannot be changed.
According to New Jersey regulations, a Special Needs Trust is intended to allow an individual to have assets to supplement, but not replace, any benefits or assistance from a federal, State or governmental entity for which the beneficiary is eligible or receiving benefits.
Parents of children with special needs should consider obtaining guardianship of their adult child as well as setting up a Special Needs Trust when they begin their estate planning or sooner if their child with special needs is likely to have long-term medical or support needs. Both guardianship and Special Needs Trusts are important vehicles for protecting children with special needs.