Often, I hesitate to recommend the creation and funding of a Special Needs Trust (SNT) even though a Special Needs Trust is often used when a person with disabilities receives a settlement in a lawsuit, an inheritance, equitable distribution award in a divorce, alimony or child support. There are reasons for this position which I will explain to you in greater detail on this page.
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Some of the reasons that a SNT may be inappropriate are:
- The beneficiary does not or may never qualify for meaningful public benefits. For example, the beneficiary may not be significantly disabled or may already be over age 65, and therefore, may not require much in the way of present or future public benefits. In such a case, the limitations and spending limitations required by an SNT are not worth it to the trust beneficiary.
- The beneficiary may not be receiving means-tested public benefits, such as SSI and Medicaid, and may never require such benefits in the future. This is a big consideration in my thinking and in my advice to individuals and families who are considering the creation of an SNT. Because there are limitations and certain restrictions on how the funds in an SNT can be spent, we want to be sure it’s reasonably probable the person will need benefits in the future.
- If the amount of money ($$$) coming to the special needs person is so large that public benefits may not be necessary, why would we want to impose limitation(s) on how the funds in the SNT can be spent? The answer is we wouldn’t and therefore we will not want to create an SNT now. The better decision is to wait to see how the future evolves for the person and in the meantime, create a revocable support trust. Want to learn more about a Revocable Support Trust? If so, visit my page on Trusts. It’s full of great information about the subject. (CLICK HERE)
- Perhaps, the amount of the lawsuit settlement, gift or inheritance will be too small. For smaller amounts (under $16,000) it is usually better to seek an alternative to a Self-Settled Special Needs Trust, if possible, because of the expense associated with establishing and maintaining the trust. If the net settlement is $30,000 or less, then a trust may or may not be appropriate. An ABLE account, pooled or community trust alternative may be a good option for a settlement over $30,000 but less than $50,000.
- New Jersey has adopted a law authorizing the creation of A.B.L.E. accounts. An A.B.L.E. account may be a viable alternative for your loved one. To learn more about an ABLE account, see the page “An Able Account: A Powerful Alternative to a Special Needs Trust” found on this site. Check the Table of Contents on the right side of the home page.
- Often, it is difficult to find a professional trustee if the amount of liquid assets to be placed in the trust is less than $100,000. We do have relationships with several smaller community trust companies and non-profits together with private attorneys that may be willing to serve as trustee for modest Special Needs Trusts. It’s worth a look.
Let’s talk about your interest in a Special Needs Trust. Call my office today. Ask for me to personally discuss your New Jersey Special Needs Trust. I can be reached toll-free at (855) 376-5291 or e-mail me at firstname.lastname@example.org.
Written by Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a New Jersey Special Needs Trust Attorney