A special needs trust (SNT) can give you peace of mind that a loved one with a disability will continue to receive the government benefits such as Medicaid and Supplemental Security Income (SSI) payments while still being able to receive other assets and inherit money from you and other family members.
That’s because the person with the disability doesn’t legally own or have access to the trust assets. They’re the beneficiary.
Special needs trusts must comply with federal and state law
Special needs trusts (also sometimes known as “supplemental needs trusts”) are provided for under federal and New Jersey state law. According to federal law, an SNT can be established for any person under 65 who is considered disabled by the Social Security Administration (SSA).
Establishing an SNT for a loved one in our state also requires strict adherence to New Jersey law. The trustee must also submit reports each year of the trust’s financial activity to the appropriate state agencies.
Key requirements under New Jersey law
Let’s look at some of the requirements for establishing and maintaining an SNT that allows the beneficiary to continue to receive and keep Medicaid and SSI benefits.
- The beneficiary must be considered disabled under federal law.
- Only a parent, grandparent, guardian or the court can establish an SNT.
- The SNT must be irrevocable.
- Any cash distributions must be reported as unearned income.
- Once the beneficiary turns 65, no further transfers can be made to the trust.
- This is far from a complete list of requirements.
If you are considering establishing an SNT for a family member, it’s crucial that you seek experienced legal guidance. This will help you ensure that the trust has been properly established under both state and federal law and that it remains in compliance so that your loved one can be provided for financially both while you’re still here and after you’re gone.