If you are planning to pass down your assets to a loved one with special needs, you have to think about how your estate plan might affect their lifestyle requirements. In many situations, a standard estate plan may not be the best approach for a beneficiary with disabilities in New Jersey. Here is why.
What are the challenges with a standard estate plan?
Many individuals with disabilities usually receive means-tested financial support from government programs such as Supplemental Security Income (SSI) and Medicaid. When they inherit money or property, it can directly harm those benefits. The problem with both programs is that they have a ceiling for assets their claimants can own. For instance, SSI generally limits an individual’s countable resources to $2,000, although certain assets may be excluded under federal rules. Medicaid also has eligibility rules depending on the program and the applicant’s circumstances. Therefore, when your loved one inherits assets worth more than the government programs permit, they might lose the financial benefits.
What is the solution?
It is possible to bequeath money or property to a loved one with disabilities without affecting their eligibility for social programs. One effective solution is a special needs trust, which typically involves three key roles:
Grantor: The person who establishes the trust and transfers the assets.
Trustee: The person responsible for managing the trust and its inherited funds.
Beneficiary: The individual with a disability who benefits from the trust assets.
When properly administered, the trustee can help ensure that the beneficiary continues to receive public benefits alongside their inheritance.
How legal guidance can help
A special needs trust ensures your loved one inherits assets without losing public benefits. However, creating one requires legal guidance. Working with an experienced estate planning attorney helps you avoid future legal mistakes. It also ensures your family’s long-term financial security is better protected.