Planning for a loved one with special needs can feel scary when you worry about their future care. We know this worry well, as many families face the tough choice of how to support their disabled family members without risking their benefits.
A Special Needs Trust is a legal tool that helps people with disabilities keep their assets in the trust safe while still getting government help like Medicaid and supplemental security income.
This trust holds assets for a person with special needs without those assets counting against them for benefit programs. The trust pays for things that government benefits don’t cover, such as trips, extra medical care, or special equipment.
A properly structured Special Needs Trust acts as a safety net, protecting both benefits eligibility and quality of life for individuals with disabilities through proper special needs planning.
We often set up these trusts for our special needs planning New Jersey clients who need to plan for a loved one’s future care through a supplemental needs trust. The money in the irrevocable trust is managed by a trustee as outlined in the trust document, who makes sure it’s spent correctly.
This trustee could be a family member, friend, or even a bank or lawyer. The main goal is simple – to make life better for the person with special needs while keeping their important benefits intact.
Types of Special Needs Trusts
Special needs trusts come in three main types, each with its own rules and uses. Let’s look at how each type works for folks with disabilities.
First-Party Special Needs Trust
First-party special needs trusts hold money that belongs to the person with a disability. We often set up these trusts with funds from personal injury settlements, inheritances, or life insurance payouts.
The trust must follow strict rules. For example, the person must be under 65 years old when we create the trust. Also, the trust must pay back Medicaid for any services they paid after the beneficiary dies.
These trusts help people keep their government benefits while still having money for extra needs. The funds can pay for things that SSI and Medicaid don’t cover, like trips, extra medical care, or a TV.
Our clients find this trust useful when they get a large sum of money that might make them lose their benefits. Now let’s look at third-party special needs trusts and how they differ.
Third-Party Special Needs Trust
A third-party special needs trust is set up by parents, grandparents, or others who want to help a person with special needs. This trust holds money that never belonged to the disabled person.
The funds come from the family members who create the trust. We often help families in New Jersey set up these trusts as part of their estate plans. The big plus is that these trusts don’t have to pay back Medicaid after the disabled person dies.
These trusts give families great control over how the money is used. The trustee can pay for things that make life better for the disabled person without hurting their SSI or Medicaid benefits.
Many of our New Jersey clients like that they can name who gets the leftover money in the trust. This makes third-party SNTs a smart way to care for your loved one while keeping your family’s assets safe.
Pooled Special Needs Trust
Pooled Special Needs Trusts offer a smart option for many New Jersey families. These trusts work by joining assets from many people with disabilities into one large fund managed by a nonprofit organization.
The nonprofit serves as the trustee and handles all the money matters. This type of trust helps people who may not have enough money to set up their own trust or who need help managing trust assets.
Pooled trusts can save money and time for families in our state. They follow strict rules to protect government benefits like SSI and Medicaid. Each person has their own account within the larger trust, but the funds get invested together.
For many of our clients, this setup provides both safety and good money management. The trust can pay for things that improve life quality without risking needed benefits.
Benefits of a Special Needs Trust
A special needs trust offers many key perks for families in New Jersey. First, it keeps your loved one eligible for public benefits while giving them extra money support. This trust acts as a shield for assets that can pay for things like medical care, education, and rehab services not covered by government programs.
The trust money helps improve the person’s life without putting SSI or Medicaid at risk. Many of our clients find peace of mind knowing their disabled family member will have funds for their needs even after parents or caregivers are gone.
The trust also makes money matters easier for people with disabilities. Trust funds can be used for special equipment, trips, or personal items that add joy to life. For families worried about how to plan for a child’s future, this legal tool offers a clear path forward.
The trustee makes sure all spending follows the rules to protect those vital government benefits. Let’s now look at how we wrap up all this important info about special needs trusts.
Conclusion
Special needs trusts help protect vital benefits while adding extra support for loved ones with disabilities. They come in three main types to fit different needs and money sources.
Setting up these trusts takes care and expert help to follow all the rules. We guide families through this process every day at our law firm. Please call us to learn how we can help your family create a plan that works for your special needs situation.
