Special Needs Trust New Jersey

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Special Needs Trust

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Millions of Americans have disabled family members. The cause may be from a serious accident, injury, Down’s Syndrome, schizophrenia, cerebral palsy, autism, multiple sclerosis or countless other physical or mental illnesses.

Even if you don’t have a disabled family member, you know many individuals who do. Mental and physical disabilities do not discriminate against particular racial or socio-economic groups.

If you have a child (young or older) who is disabled, or if you know someone who does, you simply must know about Special Needs Trusts. These trusts are designed to protect assets for the benefit of an individual who is receiving public benefits without causing a disqualification of those benefits.

If the person is receiving Supplemental Security Income (SSI), Social Security Disability (SSD) or some form of state aid or assistance, they will remain eligible for these benefits with a properly drafted Special Needs Trust. If they are in subsidized housing, they will be able to continue living there.

At Hanlon Niemann, We Understand New Jersey Special Needs Trusts

Special needs is a term used in clinical, diagnostic and functional development to describe individuals who require assistance for disabilities that may be cognitive or  psychological individuals with Autism, Down syndrome, dyslexia, blindness, developmental disability or cystic fibrosis for example, may be considered to have special needs.

We Can Help.

Why use a Special Needs Trust for a disabled individual?

  1. The disabled beneficiary will keep his/her income (SSI or SSD) and health care benefits.
  2.  Money in the trust can be used to pay for items and services not covered by public benefits
  3.  Money in the trust can be used to pay for a doctor who will not accept Medicaid.
  4. Parents control where trust assets go before and after the child is deceased.
  5. The only alternatives to the Special Needs Trust are (1) leaving nothing to the child; or (2) leaving money in trust that does not have these restrictions.

Selecting choice (2) will cause the loss of public benefits. After the assets are spent down to under $2,000, the child can go back on public benefits. All the money you have given will be lost.

Consult With a New Jersey Special Needs Trust Attorney Today

Contact Fredrick P. Niemann, Esq. of Hanlon Niemann toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com.

As a father himself, Mr. Niemann is a sensitive and caring attorney and willing to help you achieve the brightest possible future for your child or family member.

Types of Special Needs Trusts  in New Jersey

Major Distinctions

Two major distinctions may be drawn among all special needs trusts.  A special needs trust will be either a “Third Party Trust” or an OBRA 1993 Trust.  You may initially determine whether a special needs trust is a Third Party Trust or an OBRA 93 Trust by looking at the source of the assets used to fund the trust.  If the assets used to fund the trust do not belong to the beneficiary, or if they are not deemed to belong to the beneficiary, then the trust is a Third Party Trust.  In other words, Third Party Trusts will always be established by someone other than the beneficiary and with funds in which the beneficiary has no ownership interest.  For example, funds coming from a parent, grandparent or sibling.

Third Party Special Needs Trusts in New Jersey

There are two general requirements for a Third Party special needs trust.  First, these trusts must be established by someone other than the trust beneficiary.  Third Party Trusts are usually established by parents of adult children, grandparents, aunts, uncles, siblings, friends, or any other independent party with no legal duty to support the trust beneficiary.  A spouse cannot be considered a third party.  The second key requirement is that these trusts must be established with funds in which the beneficiary has no ownership interest.  Third Party Trusts can be more easily adapted to the needs and wants of the person creating the trust and can therefore be part of a more traditional estate plan.  They can be revocable or irrevocable, and most significantly, do not require any “payback provisions” to New Jersey upon the death of the beneficiary.  Payback provisions are explained in the last part of the section which follows immediately below.

Disability Trusts in New Jersey

These trusts are also referred to as (d)(4)(A) trusts, which alludes to where they can be found in the Federal statute that authorizes them.  This type of trust is generally called a “special needs trust”.  To establish a valid Disability Trust in New Jersey, it must satisfy the legal requirements set forth below:

  • The Trust must be established solely for the benefit of an individual who is disabled as defined by law and who is under 65 years of age.
  • The trust may only be established by the individual’s parent, grandparent, legal guardian, or a Court.
  • The Trust must be established with assets belonging to the individual.

Any funds that happen to remain in the Trust at the individual’s death must be used to reimburse the State for medical benefits provided over the individual’s lifetime.  This requirement to reimburse the State is commonly referred to as a payback provision.

What About Pooled Trusts in New Jersey

These trusts are also referred to as (d)(4)(C) trusts.  To establish a valid Pooled Trust, it must satisfy the legal requirements set forth below in plain language.

  •  The Trust must be established and managed by a non-profit association.
  •  The Trust must maintain separate accounts for each Beneficiary, but the funds are pooled for purposes of investment and management.
  • Each separate Trust account must be established solely for the benefit of an individual who is disabled as defined by law, and it may only be created by that individual, the individual’s parent, grandparent, legal guardian, or a Court.  There are no age restrictions or requirements.
  • The individual’s account must be established with assets belonging to that individual.

Any funds that remain in an individual’s account at that individual’s death must be retained by the Trust.  Any funds not retained by the Trust must be used to reimburse the State.  This may be referred to as a modified payback requirement.