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An overview of New Jersey special needs trusts

On Behalf of | Jul 1, 2024 | Trusts

People who have loved ones with a serious disability who rely on them financially and in just about every other way are often incentivized to put an estate plan in place earlier than they would otherwise. They want to ensure that their loved one continues to be cared for and supported when they pass away or if they become unable to care for them.

One of the most important documents to put in place is a special needs trust (SNT). It’s also sometimes called a supplemental needs trust. An SNT doesn’t just help ensure your loved one’s financial support and care if they aren’t there to provide it. It also helps you provide the best possible care while you’re still here.

How an SNT helps the beneficiary

A key goal of an SNT is to allow a disabled loved one to have the best quality of life you can provide for them without losing the government benefits they’re able to receive — like Supplemental Security Income (SSI) and Medicaid. Under federal law, the beneficiary of an SNT trust must qualify as disabled under the Security Administration’s definition and can’t be 65 or older.

A properly established SNT also allows them to receive inheritances from you and others without risking those benefits. That’s because while the disabled person is the beneficiary of the trust, they can’t access the assets in it. Only the trustee(s) can. 

Requirements under New Jersey law

Laws regarding SNTs vary somewhat by state. A few requirements under New Jersey law include the following:

  • An SNT can only be established by the beneficiary’s parent, guardian, grandparent or a court.
  • The assets in the SNT can only be used for the beneficiary.
  • The SNT must be irrevocable.

Further, when the beneficiary passes away, the state is the “first remainder beneficiary.” That means the state has the right to take any remaining Medicaid benefits 

The laws and regulations around SNTs are numerous and stringent – to protect the beneficiaries as well as public money. It’s crucial to establish and maintain the trust properly to help ensure that your loved one can benefit from the assets available for their care. That’s why having experienced estate planning guidance is crucial.