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Understanding Special Needs Trusts

If you have a loved one who suffers from a disability, you want that person to have access to as many governmental benefits and programs as possible. However, if that person owns property or has income, eligibility for Medicaid, Medicare or other government benefits can be compromised. Accordingly, if you leave property to that person in your estate, it will likely put them at risk of losing critical benefits until they go through their inheritance, at which time they would go back on public assistance. We recommend a Special Needs Trust to give your special needs person some relief and improved quality of life without losing their governmental benefits.

How a Special Needs Trust Works

A trust is a separate legal entity that has the capacity to own money and property. When you create a special needs trust, you essentially form a new legal entity into which you can transfer property. Because the trust owns the property (and your loved one with special needs does not own the property), the inheritance will not be used to disqualify that person from benefits.

Setting Up a Special Needs Trust

In any trust, you have a grantor, a trustee and a beneficiary. The grantor creates the trust and conveys property into the trust. The trustee is charged with managing the property in the trust—overseeing investment of trust assets, making distributions and otherwise governing the trust assets. The beneficiary is the recipient of trust assets and/or income.

To establish a trust, you must create a legal document that identifies who the trustee will be, what the trustee’s responsibilities are, and how trust assets will be managed and distributed. The trust may be funded while you are alive—what is known as an “inter vivos” trust (Latin for during your life) or it may be funded at the time of your death, through what the law calls a “testamentary” trust.
There are few limits to the types of property that can be placed in trust—cash, investments, business interests, real and personal property can all be held in trust. However, because the purpose of a special needs trust is typically to provide financial support, the trust document will usually grant the trustee the right to convert hard assets, such as cars and jewelry, to cash.

In addition, almost anyone can place property into a trust—the only exception being the beneficiary of the trust.

Contact Our Office

At the law offices of Gary F. Woodend, MBA, JD, we have protected the rights of hundreds of New Jersey residents in probate and estate matters. We have the knowledge, skill and experience to handle complex, multimillion dollar estates. To schedule a confidential consultation, call us at 609-654-5489 (toll-free at 888-336-8417) or contact our office online.

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