Special Needs Trusts for People with Disabilities
- What is a Special Needs Trust?
A Special Needs Trust (SNT) is an estate planning tool that permits parents, grandparents, guardians, or a court to set aside money or property or both for the person with a disability (PWD) without putting at risk their eligibility for government benefits.
- For Whom Can a SNT Be Established?
A PWD or an “Incapacitated individual” means an individual who is impaired by reason of mental illness or intellectual disability to the extent that the individual lacks sufficient capacity to govern himself and manage his affairs. It can also mean a person “who is impaired due to a physical disability, chronic use of drugs, chronic alcoholism, or other cause” such that the individual lacks the ability to govern himself or his affairs. N.J. Stat. § 3B:1-2.
- For What Purpose Can a SNT be used?
Federal law permits “the establishment of a trust to supplement and augment assistance for a person who is disabled without disqualifying that person from benefits under the Medicaid program.” N.J. Stat. § 3B:11-36.
SNT funds must be used for the needs of the trust beneficiary.
The SNT can be established and funded prior to the day on with the PWD reaches the age of 65 years to receive Medicaid benefits.
- SNT’s in New Jersey Must Comply with New Jersey Law and Regulations.
To qualify for exemption from the usual trust rules in New Jersey, the trust must contain numerous specific provisions, including:
- Must identify as an OBRA ’93 trust;
- Must be irrevocable (i.e., there should be no right of alteration);
- Must be solely for the benefit of the person with a disability;
- Must state specifically that its purpose is to permit the use of trust assets to supplement and not supplant, impair, or diminish any federal, state benefits or assistance. J. Admin. Code § 10:71-4.11;
- Must contain the individual’s assets, which can include gifted assets;
- All deposits to the trust must occur prior to the individual reaching age 65.
- What is the Process for Obtaining Medicaid Eligibility?
- Apply for Medicaid.
- Submit the SNT and Schedule A list of assets to the agency that will determine eligibility (the County Welfare Agency (CWA), DMAHS’s Institutional Services Section (ISS), or the federal Social Security Administration (SSA) District Office ((for Supplemental Security Income (SSI) beneficiaries))
- If the PWD has already established eligibility for Medicaid when the SNT is established, the PWD must report changes in income or resources, if any, to the agency.