What is a Special Needs Trust and How Can it Help My Family?

Somerville family law firm can help clients set up a special needs trust.Written by: Joanna Adu, Esq.

A Special Needs Trust (sometimes called a Supplemental Needs Trust) or “SNT” is a specific type of trust, created by federal law, that allows an individual with special needs, or someone on behalf of that individual with special needs (commonly parents or grandparents), to hold assets in trust for that person without effecting his or her ability to receive certain government benefits that have income limits, like Medicaid or Supplemental Security Income (SSI).

For example, if a parent were to put $10,000 in a savings account for their child with special needs, Medicaid would consider that $10,000 to be an asset to the child, which may disqualify them from eligibility. However, under a SNT, it is the trust that owns the asset and the beneficiary (the special needs individual) does not have ready access to same. As such, anything that is transferred into the SNT will not negatively affect the beneficiary’s ability to access federal benefits that he or she may need.

Unless a family has the means to set aside enough money to provide for the individual with special needs for the rest of his or her life, preserving their ability to access federal benefits is crucial. Medicaid eligibility allows individuals to access community housing, therapies, programs, etc. that are otherwise extremely expensive.

There are two types of SNTs, a self-settled trust or a third-party trust. The self-settled trust contains assets belonging to the individual with special needs and a third-party trust contains assets set aside by others for the benefit of the individual with special needs. There are certain important differences between the two types of SNTs. For example, under a self-settled trust, the trust must provide that when the individual with special needs passes away, Medicaid will be reimbursed for services provided during that individual’s lifetime. This is not required under a third-party trust.

A special needs trust is irrevocable, meaning that once assets are transferred into the trust, they cannot be transferred out (unless it falls within a provision under the trust). Further, a trustee(s) will be designated who will control use of the trust. It is common for parents or other family members serve as trustee(s).

One of the reasons why SNTs protect assets from government benefits consideration is because the assets contained therein may only be distributed for very specific purposes that must be outlined in the trust. Generally, money may not be released for purposes that overlap with federal benefits. For example, social security benefits are meant to cover basic living expenses (housing, food, etc.), as such an SNT cannot disburse funds to overlap that benefit (although distributions may be made to supplement as needed).

If you are looking to create a Special Needs Trust it is important to have an attorney that is experienced and knowledgeable. Fortunately, our skilled and knowledgeable New Jersey attorneys at Lyons & Associates, P.C. have extensive experience in addressing this particular issue. We invite you to contact us online or give us a call at our office at 908-575-9777 to schedule an appointment.