In the all-important process of estate planning, trusts can serve a vast variety of purposes. Their versatility makes trusts a complicated topic, but all of them have a basic structure in common: Trusts empower a trustee to manage assets on behalf of a beneficiary. If you have a loved one with a developmental disability, one of the best ways you can ensure they get a fair share of your estate and have their quality of life provided for is by using a special needs trust (SNT). Moreover, more so than other kinds of trusts, an SNT will often require active monitoring and sometimes alterations so that it can be carried out properly.
If you intend to set up a special needs trust but don’t know where to start, SGW Law is here to help. Our experienced team of New Jersey estate planning and special needs law attorneys is ready to guide you through the entire process. With us on your side, you’ll have not only peace of mind, but a unified estate plan that works best for you and your heirs. Contact our team now or read more below about the steps to building a special needs trust.
Understanding the Purpose
Most individuals with special medical needs are eligible for one or more forms of government benefits. These include Supplemental Security Income (SSI) as a monetary benefit and Medicaid as low-cost health insurance. To be certain, these programs can’t entirely provide for a fulfilling life, and other sources are needed. However, they are still necessary for many people with developmental disabilities.
Therefore, a special needs trust is not a replacement for benefits. Instead, this type of trust is intended to supplement existing programs and enhance the beneficiary’s standard of living. Money placed in an SNT can, and should, be used for education, housing, transportation, recreation and entertainment, and personal care.
Choosing the Right Trustee
All trustees have stringent legal obligations, and this is even more so in the case of a special needs trust. The trustee must always act in the beneficiary’s best interest, make distributions in a timely manner, and keep in compliance with relevant laws. Since the beneficiary of an SNT could be vulnerable in certain ways due to disability, this means trusteeship is a great responsibility.
The trustee need not have special training. Whomever you choose, though, it should be someone you can confidently entrust the beneficiary’s care to. A family member who has a close relationship with the beneficiary or a reputable non-profit organization for people with disabilities could be ideal trustees. Ultimately, your attorney can advise you when it comes to selecting a trustee.
Proper Use of Funds
Keeping in mind an SNT’s purpose of supplementing benefits, you should make sure fund distribution supports this goal. In other words, the funds from the trust should usually never be disbursed directly to the beneficiary – having too high an income could jeopardize their benefit eligibility.
Instead, the trust should define approved expenses that are essential for a full life but that are outside the purview of benefits. These may include education or vocational training, paying caregivers, assistive technology, therapies and medical expenses not covered by Medicaid, travel, or personal property such as furniture and electronics.
Record-Keeping and Reporting
Regulations differ for trusts between jurisdictions, but it’s always incumbent upon the trustee to keep detailed records of all transactions. For a special needs trust, accurate records are important so that the beneficiary can continue to receive the aforementioned government benefits without issue. Reporting to government agencies at appointed times, such as when taxes are filed, is usually required. An attorney with special needs experience is the best person to consult about what laws are relevant in your situation and how to keep a trust in compliance.
Investment and Growth
A person who has a developmental disability likely has day-to-day needs that will persist for their entire life. This means that it’s especially crucial that the trustee of an SNT responsibly invests the assets in trust. Low-risk long-term growth is key in this instance. As you create and edit a special needs trust, you and your trustee should be in consultation with a financial advisor who has experience in this particular area. If you don’t know where to find an appropriate financial advisor, your attorney can help connect you with such a professional.
Regular Reviews and Updates
Every part of an estate plan is regulated by laws that are subject to change – tax laws, for example, are altered to some extent every year. There isn’t necessarily a need to edit a special needs trust with every single change in legislation. However, an attorney specializing in this area will be the person who is most aware when changes need to be made. For this reason, you should have your SNT documentation reviewed on a regular schedule.
Besides changes in the law, other changes in circumstances may mean the trust needs amendments. First among these is a shift in the beneficiary’s needs – for example, if they receive a new medical diagnosis. The trustee may also need to be changed, such as if the family member originally appointed can’t meet the obligation due to health reasons. An estate plan isn’t static, and its components can and should change over time, especially an SNT, which is intended to meet unique individual needs.
Contact Our NJ Estate Attorneys
SGW Law’s NJ-based team has many decades of collective experience not only in estate planning, but also advocating for individuals with special needs. If you are setting up or revising a special needs trust in New Jersey, we are always prepared to help and answer all your questions. Get in touch with us now so we can assist with an SNT that is best for you and your loved ones.