Setting Up a Special Needs Trust in New Jersey: A Guide for Guardians 

It is important for guardians of individuals with special needs in New Jersey to understand the value and process of setting up a special needs trust.  In recent years, the Affordable Care Act has provided crucial insurance coverage for individuals with pre-existing conditions, including those with special needs. This has reduced the reliance on Medicaid or SSI for coverage. Before the ACA, individuals with special needs and their guardians faced concerns about exceeding the resource limit required for coverage. Transferring money to another account to meet the limit could result in a period of ineligibility under Medicaid’s asset "look-back.”

Many have opted instead to establish a special needs trust (SNT) to navigate these challenges.

Understanding Special Needs Trust (SNT) 

Irrespective of political changes, the well-being of people with special needs remains a priority. It is crucial to ensure that their specific needs are addressed. A special needs trust is not merely a tool to maintain eligibility for Medicaid or SSI but a means to secure the necessary resources for their care. Recognizing that the government cannot fully provide all the services required by individuals with special needs, an SNT acts as a dedicated fund for their unique circumstances. 

Advantages and Disadvantages of Setting Up a Special Needs Trust 

Several advantages arise from setting up a Special Needs Trust, with most stemming from the fact that the funds are exclusively reserved for the individual's care. Consider the following benefits:

Medicaid preferred status: 

The funds used to create an SNT do not count against someone receiving government benefits, and can be used for their care to supplement those benefits.

Protection from Exploitation: 

A Special Needs Trust safeguards individuals with disabilities from potential exploitation or undue influence in financial matters.

Creditor Protection: 

The funds in an SNT cannot be used to satisfy lawsuit judgments or creditors, ensuring the resources are solely utilized for the individual's well-being.
Disadvantages of Setting Up a Special Needs Trust

While there are many advantages to establishing a Special Needs Trust, it is important to be aware of the associated disadvantages as well:

Financial Costs: 

Setting up an SNT involves certain expenses, including legal fees, some annual accounting and upkeep, and the possibility of paying a trustee or fiduciary. 

Limited Independence: 

There are limitations on how and when the money in a SNT can be used for a beneficiary. The lack of flexibility can be frustrating.

Medicaid Payback:

Depending on the type of SNT, Medicaid may be entitled to a lien on the remaining money to recoup costs of the services it provided upon the death of the beneficiary.

 
The Importance of Consulting an Attorney

Given the complex legal landscape surrounding special needs trusts, it is highly recommended to seek the assistance of an experienced attorney specializing in creating them. From the initial establishment to the eventual termination of the SNT, state and federal laws govern its use. An attorney will ensure compliance with these regulations and help determine the appropriate type of trust based on the funding source.

Whether the trust is funded directly by the individual with a disability or by a third party, such as parents or guardians, an attorney will guide you through the process while considering Medicaid lien rules. Moreover, as the needs of the beneficiary evolve, the trust may require adjustments or modifications, making legal expertise invaluable in those limited circumstances.

 
Remember, setting up a special needs trust can provide the necessary support and protection for your loved one with special needs, ensuring their long-term care and financial stability. Feel free to reach out to our office with any inquiries you may have regarding special needs trusts in New Jersey.