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Understanding special needs trusts

Understanding special needs trusts

On Behalf of | Jan 3, 2022 | Trusts

Many New Jersey families bear an especially heavy burden: a disabled child or close relative. Including a disabled person in an estate plan can be difficult without using one of the most helpful estate planning tool developed in the last 20 years: a special needs trust. Understanding the basic elements of a special needs trust can significantly lighten the burden of caring for a disabled child or adult as the parents reach the ages where they cannot be assured of having the ability to care for the child.

Why were special needs trusts created?

Many government programs, such as Medicaid and Supplemental Security Income, were created to help persons of limited means as they age. Unfortunately, these programs have income or asset limitations on eligibility. Special needs trusts (SNTs) were devised to get around this barrier by creating a rule that excludes certain assets from the calculation of financial eligibility. The special needs trust must be irrevocable and must include assets that may be used exclusively for the named beneficiary to purchase food, shelter, medical care and other necessities. If the SNT was properly set up, none of the assets placed in the trust can be used to calculate the beneficiary’s eligibility for Medicaid, SSI, or other government assistance programs. Only certain individuals are allowed to create an SNT: these groups include parents, grandparents, guardian or a court.

A trustee is necessary

An SNT must be administered by a person appointed by the grantor of the trust assets. Many financial firms offer professional trustee services tailored for SNTs. While these firms offer the advantage of qualified professional administration, they all charge fees which may significantly reduce the amount of assets available to the beneficiary over the life of the trust.

Anyone with a disabled relative may wish to investigate the feasibility of using an SNT to ensure the financial well-being of the relative. A consultation with an experienced estate planning attorney can be a very helpful ally in exploring the subject and setting up the trust.


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