When they are planning their estates, many New Jersey residents have their adult children and grandchildren as their top priorities. They hope to leave a legacy that will make life easier for their loved ones into future generations. One way to do this is by creating a trust that will protect assets and provide income for many years to come.
For parents of children who have special needs, the goals are similar: They want their loved ones to have the resources they need. The tools can be similar as well: A trust can provide income to the special needs child for many years to come.
However, these parents may need a different type of trust to achieve their goals. A special needs trust is specially designed to help people with special needs.
Basics of trusts
To explain how a special needs trust works, first we should review the basics of trusts.
A trust is a way of dividing ownership in property. A grantor puts the assets into the trust, where it is managed by the trustee for the benefit of the beneficiaries.
A grantor can set up a so-called living trust that goes into effect during their lifetime. Depending on the specifics of the trust document, they may even set up a trust with themselves as the trustee and/or beneficiary. In this type of situation, the grantor names successors to take over their roles so that the trust can continue after their death.
Eligibility for benefits
In a special needs trust, the parents of an adult child with special needs might set up a trust with themselves as trustee and the child as beneficiary. They may appoint a professional to take over as trustee after their death so that the trust can continue providing for their loved one.
So far, the above paragraph describes many trusts. What sets a special needs trust apart is that it can be designed to maintain the beneficiary’s eligibility for government benefits.
Medicaid and many other government programs have strict eligibility requirements based in part on the applicant’s income and assets. If the trust provides just a little too much in income, it could put the recipient over the threshold of eligibility.
Given the high cost of health care in this country, there are few people who can afford to pay for lifelong care without the help of some sort of benefits. Maintaining eligibility for these programs can be crucial.
When set up properly, a special needs trust can maintain the beneficiary’s eligibility for much-needed benefits while also providing them with a small income.
These trusts take skilled planning, but experienced attorneys can help families understand how they work.