What is a Special Needs Trust?
Special Needs Trust
A Special Needs Trust is a special kind of trust that is created when the beneficiary is physically or mentally disabled. You should create a special needs trust when the person receiving your money or properties falls into one of those two categories. Special Needs Trusts are also sometimes called Supplemental Needs Trusts.
Why choose a Special Needs Trust over other kinds of Trusts?
There are multiple reasons for choosing a special needs trust. For one, if the beneficiary is mentally ill or cognitively challenged, this kind of trust creates an environment in which they are never forced to manage their own finances. Another critical aspect of a special needs trust is that it helps the beneficiaries avoid losing government benefits. For example, in New Jersey, when you apply for Medicaid, your assets that are in a Special Needs Trust are not counted when a resource test is conducted. Because of this, your beneficiary is still eligible to Medicaid, supplemental security income, and other benefits. In other words, a special needs trust helps provide a way for a person who has a disability to receive financial support without losing their eligibility for SSI or Medicaid.
A Special Needs Trust is always a good choice when your beneficiary has a disability because you get to choose who their trustee is. If your beneficiary is mentally disabled and not able to responsibly take control of the assets in the trust, you know that the trust is in the hands of someone who will be looking out for your beneficiary’s best interests. It is typical for a family member to be chosen as a trustee, but sometimes a bank or a social worker may be chosen to serve as a trustee.
For more information on why and when you should use a Special Needs Trust, go to an estate planning attorney who can provide you with more information.
Pooled Special Needs Trusts:
Pooled Special Needs Trusts are trusts run by non-profit groups in which the assets of all of the beneficiaries are combined. The combined assets are then split amongst the individual trustees proportionately to how much they had originally put into the pool. Pooled Special Needs Trusts can be a good option because the people running the non-profit organizations often have a lot of experience and knowledge about working with those who are disabled. Because of this, they are skilled and experienced at deciding where the money is best spent for each beneficiary. Also, since the trusts are pooled from multiple sources, if you as the grantor do not have a lot of money to leave your beneficiary, the Pooled Special Needs trust can allow your beneficiary to have access to more money and resources than you would be able to leave for him or her on your own.
Some drawbacks to pooled trusts are that they can be expensive and they also do not leave you a lot of flexibility once you have signed on to the trust. It is hard to move your money or assets once you enter a pooled trust, so your beneficiary is stuck with this trust. This is not necessarily a bad thing, but you have to research the pooled trusts carefully before you choose which one you want to join. There are some pooled trusts that are run very well, while there are others that are run poorly. This all depends on the non-profit group behind the pooled trust. Another negative aspect about pooled trusts is that they do not often allow the grantor to place land and other non-monetary assets into the pooled trust.
Next Steps:
Each state has their own pooled trusts, so do some research and find out which pooled trust in New Jersey is the best choice for you. Also, meet with an estate planning attorney who can help you determine if you want to simply use a Special Needs Trust or a Pooled Special Needs Trust. They can help you figure out which is the best choice for your specific situation.
Why choose a Special Needs Trust over other kinds of Trusts?
There are multiple reasons for choosing a special needs trust. For one, if the beneficiary is mentally ill or cognitively challenged, this kind of trust creates an environment in which they are never forced to manage their own finances. Another critical aspect of a special needs trust is that it helps the beneficiaries avoid losing government benefits. For example, in New Jersey, when you apply for Medicaid, your assets that are in a Special Needs Trust are not counted when a resource test is conducted. Because of this, your beneficiary is still eligible to Medicaid, supplemental security income, and other benefits. In other words, a special needs trust helps provide a way for a person who has a disability to receive financial support without losing their eligibility for SSI or Medicaid.
A Special Needs Trust is always a good choice when your beneficiary has a disability because you get to choose who their trustee is. If your beneficiary is mentally disabled and not able to responsibly take control of the assets in the trust, you know that the trust is in the hands of someone who will be looking out for your beneficiary’s best interests. It is typical for a family member to be chosen as a trustee, but sometimes a bank or a social worker may be chosen to serve as a trustee.
For more information on why and when you should use a Special Needs Trust, go to an estate planning attorney who can provide you with more information.
Pooled Special Needs Trusts:
Pooled Special Needs Trusts are trusts run by non-profit groups in which the assets of all of the beneficiaries are combined. The combined assets are then split amongst the individual trustees proportionately to how much they had originally put into the pool. Pooled Special Needs Trusts can be a good option because the people running the non-profit organizations often have a lot of experience and knowledge about working with those who are disabled. Because of this, they are skilled and experienced at deciding where the money is best spent for each beneficiary. Also, since the trusts are pooled from multiple sources, if you as the grantor do not have a lot of money to leave your beneficiary, the Pooled Special Needs trust can allow your beneficiary to have access to more money and resources than you would be able to leave for him or her on your own.
Some drawbacks to pooled trusts are that they can be expensive and they also do not leave you a lot of flexibility once you have signed on to the trust. It is hard to move your money or assets once you enter a pooled trust, so your beneficiary is stuck with this trust. This is not necessarily a bad thing, but you have to research the pooled trusts carefully before you choose which one you want to join. There are some pooled trusts that are run very well, while there are others that are run poorly. This all depends on the non-profit group behind the pooled trust. Another negative aspect about pooled trusts is that they do not often allow the grantor to place land and other non-monetary assets into the pooled trust.
Next Steps:
Each state has their own pooled trusts, so do some research and find out which pooled trust in New Jersey is the best choice for you. Also, meet with an estate planning attorney who can help you determine if you want to simply use a Special Needs Trust or a Pooled Special Needs Trust. They can help you figure out which is the best choice for your specific situation.