When Not to Use a
Special Needs Trust
Written by Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a New Jersey Special Needs Trust Attorney
Often times I hesitate to recommend the creation and funding of a Special Needs Trust (SNT) even though a Special Needs Trust is often used when a person with disabilities receives a settlement in a lawsuit, an inheritance, equitable distribution award in a divorce, alimony or child support. There are reasons for this position which I will explain to you in greater detail on this page.
When NOT to Use a Special Needs Trust
Some of the reasons that a SNT may be inappropriate are:
- The beneficiary does not or may never qualify for meaningful public benefits. For example, the beneficiary may not be significantly disabled or may already be over age 65. Remember there must be medical eligibility to qualify for a SNT.
- The beneficiary may not be receiving means-tested public benefits, such as SSI and Medicaid, and may never require such benefits in the future. This is a really big consideration in my thinking and in my advice to individuals and families who are considering the creation of a SNT. Because there are limitations and certain restrictions on how the funds in a SNT can be spent, we want to be sure its reasonably probable the person will actually need benefits in the future.
If the amount money ($$$) coming to the person is so large that public benefits may not be necessary, why would we want to impose limitation(s) on how the trust funds can be spent? The answer is we wouldn’t and therefore we will not want to create a SNT now. The better decision is to wait or create a revocable support trust. Want to learn more about a Revocable Support Trust? If so visit my site www.njtrustattorney.com. It’s full of great information about the subject. (CLICK HERE) In those situations a determination should be made whether a special needs trust is appropriate for other reasons. Perhaps a support trust would be adequate and much more flexible.
- Perhaps, the amount of the lawsuit settlement, gift or inheritance will be too small. For smaller amounts (under $50,000) it is usually better to seek an alternative to a Self-Settled Special Needs Trust, if possible, because of the expense associated with establishing and maintaining the trust. If the net settlement is between $50,000 and $200,000, then a trust may or may not be appropriate. A pooled or community trust may be a good option.
- New Jersey has adopted a law authorizing the creation of A.B.L.E. accounts for smaller amounts gifted and/or paid to disabled persons. An A.B.L.E. account may be a beneficial alternative for your loved one. To learn more about an ABLE account, see the page “An Able Account: A Powerful Alternative to a Special Needs Trust” found on this site.
Often, it is difficult to find a professional trustee if the amount of liquid assets to be placed in the trust is less than $100,000. But I do have relationships with several smaller community trust companies that are willing to serve as trustee and financial advisor for modest Special Needs Trusts. It’s worth a look.
Let’s talk about your interest in a Special Needs Trust. Call my office today. Ask for me to personally discuss your New Jersey Special Needs Trust. I can be reached toll-free at (855) 376-5291or e-mail me at email@example.com.