SPECIAL NEEDS TRUSTS IN NEW JERSEY
Special Needs Trusts (SNTs) are a type of trust that preserves the SNT beneficiary's eligibility for needs-based government benefits such as Medicaid and Supplemental Security Income (SSI).
These trusts may also be called a supplemental needs trust, or "(d) (4) (A)” trusts after the federal law that authorized them, 42 U.S.C. § 1396p (d) (4) (A). Any individual under 65, who is disabled under the Social Security Administration standard, may place assets in an SNT to establish or maintain Medicaid eligibility. As a general rule, because the SNT beneficiary does not own the assets in the trust, he or she can remain eligible for benefit programs that have an asset limit. Additionally, the federal law exempts transfers of assets into an SNT from a penalty.
However, in order to use the SNT to obtain or retain Medicaid benefits, both the trust document and annual SNT accountings must be disclosed and reviewed. There are several requirements in order to establish an SNT. Some of those requirements include but are not limited to:
SNT beneficiary has been determined disabled under 42 USC 1382 (a) (3) (A).
SNT is irrevocable.
SNT is for the sole benefit of the SNT beneficiary.
Only specific individuals can establish the SNT (parent, grandparent, guardian, court).
On the death of the SNT beneficiary, the State of New Jersey is the first remainder beneficiary and will receive all amounts remaining in the trust up to an amount equal to the total amount of Medicaid benefits provided, minus any reimbursement or recovery of Medicaid payments previously received by the State.
Transfers to the trust after the SNT beneficiary reaches age 65 are prohibited. Any additions to the trust after the time with assets of the beneficiary are subject to the rules governing the improper transfer of resources.
Cash distributions from the trust to the SNT beneficiary must be counted as unearned income.
Annual accountings are required to be sent to the eligibility-determination agency.
In the case of a tort (personal injury lawsuit) recovery funding an SNT, the Medicaid agency must first be repaid for the Medicaid payments related to the tort before the SNT can be established.
This document is designed for general information only. The information presented in this document should not be construed to be formal legal or tax advice nor the formation of a lawyer/client relationship.
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