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Special Needs Q&A

We are particularly proud that for more than 25 years, Friedman Law has helped people with special needs, developmental disability, mental illness, traumatic brain injury, and other disabilities enjoy a better quality of life. We help families use guardianships, special needs trusts, supplemental needs trusts and other tools to put in place future care protocols and preserve Medicaid, SSI, Medicare and other government benefits.

Our special needs practice also involves special education and IEP individualized education plans as well as the IDEA Individuals with Disabilities Education Act

How SNTs preserve disability benefits

01. What is an SNT [or Special/Supplemental Needs/Benefits Trust]?

SNTs are trusts to benefit people with serious disabilities without disqualifying them for government benefits. While some lawyers call an SNT containing the beneficiary’s funds “special needs trust” and an SNT entirely funded by others “supplemental needs trust” or “supplemental benefits trust” many lawyers use the terms interchangeably.

02. How do outright payments and ordinary trusts limit eligibility for disability aid?

People with serious disabilities can qualify for various government programs to assist with basic needs including supplemental security income (SSI), Medicaid, mental health care, pharmaceutical assistance (PAAD), rent/utility assistance, and Division of Developmental Disabilities (DDD) housing. These programs are free when finances are minimal but disqualify or charge participants who can access funds for support. Thus, outright payments are disqualifying because the program participant can spend or obtain them unilaterally. Even payments in trust jeopardize eligibility if the trust may be legally obligated to fund the trust beneficiary’s basic needs. When amounts merely replace government funds, they provide little benefit especially since they could supplement rather than supplant government aid if paid into SNT. Therefore, to really help people with serious disabilities, gifts, inheritances, alimony, litigation recoveries, etc. should be paid into SNT instead of outright.

03. Why don’t SNTs disqualify beneficiaries for disability aid?

SNTs aren’t disqualifying because, unlike most trusts, SNTs are designed to avoid any obligation to fund a beneficiary’s support. Since trustees can refuse a beneficiary’s requests for distributions or help with basic needs, the SNT isn’t available to the beneficiary for support even if the SNT does sometimes pay for basic needs. Courts and government program administrators may construe ordinary trusts to have a support obligation.

04. How Can an SNT avoid recapture of public benefits?

In addition to disqualifying an individual with serious disabilities for disability aid, a gift or disposition at death paid outright to the disabled individual may be captured by government agencies to repay public benefits like Division of Developmental Disabilities (DDD) housing. The same gift or disposition at death to a well drafted SNT instead of the individual directly shouldn’t be disqualifying or subject to government capture so long as the SNT never contains the individual’s funds.

SNT Drafting Considerations

05. How can I tell if my trust is an SNT?

You probably can’t as this depends on complex trust and government benefit rules rather than a bright line test. Title alone isn’t controlling and a so-called SNT will be disqualifying if drafted poorly. For instance, a trust that mandates distributions for health, maintenance, or support or when a beneficiary reaches particular ages will jeopardize disability aid even if called an SNT. A trust that doesn’t list support as a purpose still may be construed that way due to ambiguities or poor drafting. Even a trust that looks good on its face may violate arcane legal doctrines like worthier title and merger or program regulations. A well drafted SNT clearly allows trustees alone to decide whether, why, when, and how to distribute and complies with disability program rules.

06. What’s wrong with generic form SNTs?

Cookie-cutter form SNTs can harm your loved one with serious disabilities by ignoring your family’s concerns and circumstances. For example, rather than carry out parents’ intent to help a child with serious disabilities afford decent housing, common form SNTs prohibiting distributions that may cause any cut in government aid could force the child to move when parents die. However, custom drafting would permit the SNT to pay for housing when the trustees determine the benefits outweigh the minor reduction in disability aid that may result.

07. Why shouldn’t an SNT contain funds from both the beneficiary and others?

An SNT containing the beneficiary’s funds is disqualifying unless it requires amounts remaining in trust when the beneficiary dies to repay Medicaid and the SNT complies with record keeping, notice, and accounting requirements. An SNT that doesn’t contain the beneficiary’s money need not repay benefits or meet those requirements. Therefore, third party contributions unnecessarily become subject to Medicaid repayment and administrative obligations if placed in an SNT that the beneficiary also funds.

When to use an SNT

08. When should my estate plan include an SNT?

Where your estate plan includes a beneficiary with serious disabilities, an SNT should be executed at the same time as your will even if you don’t plan to fund the SNT until you die. Otherwise you probably will disqualify your loved one for disability benefits. Because a child who doesn’t yet receive benefits may qualify on reaching age 18 or being placed in Division of Developmental Disabilities (DDD) or other disabilities housing, we recommend special needs estate planning whether or not your child or grandchild with serious disabilities currently receives disability benefits or lives at home. An SNT even can be individually designed to be beneficial whether your loved one with disabilities eventually receives aid or becomes self sufficient.

09. How Can an SNT limit long term care costs?

Gifts into certain SNTs can help a donor qualify for Medicaid and protect assets. However, any such planning requires legal counsel as poorly planned gifts can create problems.

SNTs containing litigation proceeds

10. Why should I consult an SNT lawyer before settling a law suit?

Because litigation recoveries usually are disqualifying for SSI, Medicaid, and other disability benefits, special needs planning should be part of divorce, personal injury, and worker compensation litigation where a litigant or litigant’s child has serious disabilities. Paying alimony, equitable distribution, child support, personal injury settlements, and worker compensation awards in SNT may prove essential to preserve eligibility. However, litigation funded SNTs must contain special provisions to satisfy rules that apply only to SNTs containing a beneficiary’s funds. Therefore, your marital or litigation attorney should consult special needs counsel in negotiating divorce terms, personal injury/worker compensation award, or other settlement. Options may be limited and costs higher if you wait until after your case settles.

11. Must I repay disability benefits when I settle litigation?

Medicare and Medicaid demand repayment when you realize a settlement or other award for injuries they’ve treated while Division of Developmental Disabilities (DDD) may recover housing aid whenever an individual comes into money. Repayment obligations also may arise in less common situations. Consulting special needs counsel before settling can help minimize exposure.

12. Do I also need a Medicare set-aside trust?

Medicare set-aside planning is very complicated and involves unsettled law. Essentially, Medicare is not required to fund medical care when anyone other than the patient is financially liable. Therefore, medical litigation damage awards should be exhausted for injury care before Medicare will fund such care. Through a complex process, an injured person’s obligation can be fixed and a Medicare set-aside trust established to segregate part of the award for accident treatments Medicare won’t cover. Without a Medicare set-aside trust, an individual may be unable to pay for such care. Thus, every accident victim who receives Medicare or expects to qualify soon should consider Medicare set-aside before settling a claim. Although Medicare set-aside trusts aren’t needed in every case, they can prove crucial when resolving worker compensation and larger personal injury claims. Only a lawyer with expertise in Medicare secondary payer policy can advise whether a Medicare set-aside trust is appropriate in your individual circumstances. Failing to address Medicare set-aside concerns before settling a claim can leave you without money to pay for needed medical care. FriedmanLaw frequently works with personal injury and other lawyers to implement Medicare set-aside arrangements, but we also can help you avoid a costly set-aside when appropriate.

Other Special Needs Planning Considerations

13. Should I seek guardianship if my child has special needs?

Because parents have inherent authority over minor children, guardianship usually isn’t needed before age 18. However when a child reaches age the age of majority (18 in New Jersey) parental authority ends. To retain a legal right to input in medical care, residence, finances, etc., a parent must become guardian. However, guardianship is appropriate only if your child can’t make or communicate important decisions. Therefore, some people with mild or moderate cognitive impairment may not require guardianship.

14. How do I become guardian?

To become guardian, you must file a court application supported by professional affidavits that address various aspects of capacity. The court appoints an attorney to represent your child and may hold a hearing. If the legal papers are in order and capacity isn’t at issue, the court appoints guardian(s) in due course. FriedmanLaw has helped many parents apply to court to obtain guardianship over children with serious cognitive impairments or mental illness.

15. Why should I register with Division of Developmental Disabilities (DDD) even if I want my child to live with me?

The New Jersey Department of Human Services Division of Developmental Disabilities funds day programs and residential placements and provides various services to people with developmental disabilities and their families. Because Division of Developmental Disabilities (DDD) limits programs to individuals with serious disabilities that manifest before age 22, it can be difficult to prove eligibility if you don’t apply to Division of Developmental Disabilities (DDD) before your child reaches age 22.

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