Back in the 1990’s, Congress passed a law that contained major changes to the federal Medicaid laws. Included in the law was a provision permitting the creation of a special needs trust for disabled individuals under the age of 65. This type of trust allows disabled individuals to place their assets in a special trust so he/she can preserve Medicaid eligibility. This type of trust is known as a “d(4)(A) trust, a reference to the section of the law which created it. It is also referred to as a 1st party Special Needs Trust because the assets place into the trust are owned by the disabled individual.
A special needs trust has particular importance to disabled individuals who may receive an inheritance from family members or others. These trusts are also helpful to disabled individuals who have received personal injury settlements. In both instances, the Special Needs Trust allows them to use the funds in the trust to improve their quality of life without sacrificing government assistance which pays for basic living , medical and/or long term care expenses.
Until recently, there existed for 23 years, a strange requirement under the law stated simply, that provided that only a parent, grandparent, guardian or court could set up a first party Special Needs Trusts but it did not specifically allow the disabled individual to set up the trust. This omission created an unnecessary cost for many who wanted to take advantage of this “safe harbor” for their assets.
At Hanlon Niemann & Wright, we have set up these types of trusts for clients for many years. The problem, however, we encounter exists when the disabled individual does not have a parent or grandparent alive or a guardian. That left only one option, petitioning a New Jersey court to establish the trust. This resulted in added legal fees, especially if the judge required a hearing.
That all changed recently with the adoption of the Fairness in Medicaid Supplemental Needs Trusts Act. The law inserts two words – “the individual” – into the law. Now a disabled individual can be the grantor and establish his or her own first party Special Needs Trusts without having to go to court to do so.
There will still be some disabled individuals who won’t be able to set up their own Special Needs Trusts. An individual with mental capacity issues who needs a guardian to make decisions for them won’t be able to establish their own trust, but the change solves the problem for individuals whose disability is of a physical nature and who have no need for a guardian. It’s been a long time coming and the omission never made any sense, but finally, this unfairness in the law has been rectified.
One thing remains unchanged. The laws concerning Special Needs Trusts are complicated. It is still important to consult with an elder and disability planning attorney knowledgeable and experienced in setting up Special Needs Trusts. There is too much at stake to take a “do it yourself” approach.
To discuss your NJ Special Needs Trust matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at firstname.lastname@example.org. Please ask us about our video conferencing consultations if you are unable to come to our office.
By Fredrick P. Niemann, Esq., a Freehold Township, Monmouth County NJ Special Needs Trust Attorney