The Advantages in New Jersey of
Using a Special Needs Trust

Advantages for the Trust Beneficiary

Eligibility for New Jersey Government Assistance

If the individual is already receiving government assistance benefits, he or she will continue to receive an uninterrupted flow of services with no disruption or threat to the individual’s well-being.  If the individual is just applying for benefits, then initial eligibility can be attained because the special needs trust will prevent the assets from being counted in the application process.

Reduced Cost

When medical providers contract with the State of New Jersey to provide Medicaid services, they agree to deliver those services at a significantly lower cost than if the beneficiary had to pay privately by spending down.  Also, even if the special needs trust must eventually reimburse the State for services provided over the beneficiary’s life time, reimbursement will be for this lower cost and will be free of any penalties or interest.

Use of Supplemental Needs Trusts

Through the trustees discretionary disbursements, the beneficiary has indirect availability to a fund that can provide for supplemental needs and greatly increase quality of life.  Some examples of items that can drastically increase the beneficiary’s quality of life include the following:

· Differentials in housing costs between shared and private rooms in institutional settings.
 

· Medical procedures or therapies not provided through government assistance.
 

· Supplemental nursing care and private companion services.
 

· Geriatric care services.
 

· Travel expenses.
 

· Entertainment expenses such as concerts, stereo, and other electronic equipment.
 

· Guardian Fees.

· Attorney Fees.

· Any other expense, service, or product not provided by the individual’s government assistance program.

Maximizing the Benefit of a Structured Settlement in a New Jersey Special Needs Trust

In personal injury actions, combining a special needs trust with a structured settlement can provide a second level of protection for the beneficiary.  The first level of protection is provided through the structured settlement’s ability to shield the settlement proceeds from the undue influence of new-found “friends” as well as from any of the beneficiary’s own spendthrift propensities.  Additionally, the special needs trust can provide a second level of protection by receiving the structured payments in such a way as to preserve eligibility for government assistance.  In turn, this allows the structure’s periodic payments to be maximized to the greatest extent possible.

Preservation of Choice for the Beneficiary

The beneficiary can use Medicaid or make arrangements with the trustee to pay for medical services not provided by Medicaid or for a specialist who doesn’t accept Medicaid payments.  Without regard to the beneficiary’s actual decision in any given case, however, the important point s that the beneficiary’s ability to make such a decision is preserved.

Avoidance of the Need for a Guardianship

Special Needs Trust in New Jersey are traditionally recognized as appropriate vehicles for providing fiscal management in a variety of settings.  When appropriate, the proper trust can also avoid the need for a guardian of the property because trusts are also recognized as a less restrictive means to guardianship.  In such circumstances, a special needs trust can save the beneficiary from payment for the ongoing costs and formalities of maintaining a guardianship in addition to preserving eligibility for government assistance.

The Disadvantages in New Jersey of Using a Special Needs Trust

 Trust Assets Restricted in New Jersey

The main disadvantage of a special needs trust is that the individual, and/or the individual’s family, cannot have unrestricted access to the trust assets.  While trust beneficiaries and their families sometimes see this initially as a disadvantage, this restriction generally works for the individual’s best interest.  Restricting trust assets is essential to protecting government assistance eligibility, it provides for greater financial security, and it allows the assets to be managed in a more efficient and secure manner.

Difficulty Selecting a Trustee of a New Jersey Special Needs Trust

In some situations, selecting an appropriate trustee can present problems.  Family members are often considered as the first choice, but family members often lack the objectivity and sophistication to fulfill the duties of a fiduciary in even the best of circumstances.  Professional trustees are available to a limited degree, and the benefit that professionals can provide should be discussed along with the cost for such services.  Whether professional or not, however, it is crucial for the trustee to know and understand all of the rules that govern public assistance programs because protecting eligibility for these programs is central to the trustee’s duty.  Pooled Trust arrangements can often be a very effective solution to the problem of selecting a trustee because Federal law requires the non-profit association to manage the Pooled Trust that it establishes.

Trust Assets Subject to New Jersey State Lien

Because special needs trusts must have payback provisions, New Jersey’s lien must be satisfied at the beneficiary’s death.  Thus, one disadvantage of using a special needs trust is that trust assets cannot usually be passed on to the beneficiary’s family.  One exception to this disadvantage, however, is when a Third Party Trust is used.  Because Third Party Trusts are funded with assets that do not belong to the trust beneficiary, these trusts do not require payback provisions.  See "Helping a Special Needs Grandchild".  However, even when using a special needs trust that does contain payback provisions, any assets that remain after satisfying the State’s lien can be passed on to the beneficiary’s heirs.  In addition, there is no requirement that any assets remain in the trust at the person’s death.

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Medicaid In New Jersey | NJ Medicaid Attorney | Eligibility for Medicaid in New Jersey