The term “special needs trust” is used to refer to a trust that’s for benefit of a person with disabilities who depends on means-tested public benefits that have income limits or resource/asset limits. Sometimes these are “first party trusts” — created by the disabled person (over age 18) or his parent, grandparent, or guardian with court permission, or by a court, and funded with assets owned by the disabled person. Other times they are “third party trusts” — created by somebody (such as a parent or grandparent) for benefit of a disabled family member, and funded with the parent or grandparent’s assets. Still other times, these Trusts are written into a Last Will and Testament, so that the share being left to the disabled person will be protected within the “special needs trust.” Now more than ever, families and individuals should review their estate plans to see if trusts are needed.
When an estate inheritance passes to a person who depends on means-tested benefits like SSI or Medicaid/.MLTSS, the individual might lose their benefits after receiving the inheritance because they will have excess resources. This creates a particularly risky situation for a person who receives Supports services through the NJ Division of Developmental Disabilities, because DDD benefits depend upon the person meeting those means-tested criteria. It can also be risky for an individual who receives skilled nursing benefits through the Medicaid/MLTSS program. There are remedies available, such as filing a court petition, but time and benefits can be lost while the remedies are being pursued. And now in this time of court closings due to COVID-19, everything is more difficult to pursue in court. Supreme Court release 3-27-2020
A special needs trust can be written in your Will and can be named as the beneficiary of your tax-deferred account (IRA, 401K, etc.) or your life insurance. The trust can be designated to receive the share of your probate assets that would otherwise go directly to the person with disabilities (causing the problems described above). Careful planning can prevent a crisis. If one of the potential heirs of your estate or your Will is disabled, you may want to review your plans to see if a special needs trust would be protective for your heir.
Call us for advice about estate planning with special needs trusts … 732-382-6070