New Jersey Law for Children with Special Needs : New Jersey Special Needs Lawyer & Attorney : Cole Schotz Meisel Forman & Leonard Law Firm : NJ, Mid-Atlantic Special Needs Children Planning & Trusts

Click here to listen to this article as a podcast or subscribe to our podcasts on iTunes.

While it is critical to ensure that you have adequate planning in place to preserve your child’s eligibility for government assistance, it is important for individuals to know what government benefits are available to a special needs child and when these benefits are available. Because government programs can be confusing and since they change often, anyone seeking to learn more about receiving government benefits for a special needs child should consult an attorney or review current documentation on eligibility from each individual government program.

There are four relevant government benefit programs available to special needs families.  These are Supplemental Security Income (“SSI”), Medicaid, Medicare and Social Security Disability Insurance (“SSDI”). Both SSDI and Medicare are not means based programs. In other words, there is no investigation into your finances to determine if you qualify for the program based on your income or your resources. Medicare is a form of sponsored health insurance available for the elderly and the disabled and SSDI is available to individuals and minors or special needs children of an individual who has died, retired or become disabled. A special needs child who is under age 22 and who is not working can obtain SSDI benefits based on his or her parents’ prior earnings.

SSI and Medicaid are both means based programs. Eligibility for those programs is based on financial need and strict requirements must be met prior to receiving benefits. Medicaid can provide in-home care, cost of hospitalization and nursing home care as well as some housing benefits to recipients. A special needs child can receive SSI, SSDI, Medicaid and Medicare all at the same time.

The distinction between means and non-means based programs is important to understand. Since these benefits add greatly to a disabled person’s ability to receive care, and given the expensive cost of long-term medical and nursing care, anyone seeking to give a special needs child assets may disqualify him or her from receiving means-based program benefits. However, setting up a supplemental needs trust for your special needs individual can help provide for their care without disqualifying him or her from SSI or Medicaid benefits.

Although the requirements should be reviewed periodically for changes, currently, to qualify for SSI benefits, a disabled adult cannot own more than $2,000 of assets. There is a link between eligibility for Medicaid and eligibility for SSI. Eligibility for SSI makes a disabled person eligible for food stamps and Medicaid, which pays medical expenses, nursing home care and mental health services. Given the very low poverty threshold, setting up a supplemental needs trust can help provide for extra care over and above that which the government may provide.

In addition to applying for the benefits above, special needs individuals with developmental disabilities who reside in New Jersey should apply with the Division of Developmental Disabilities (“DDD”) to preserve availability for various benefits. DDD provides a wide array of benefits including day services such as support for people who are employed, residential services such as individual support that assists an individual living at home or elsewhere in the community, and family support services that assist families caring for loved ones at home.

Parents of special needs children should make sure their child will be protected after they have passed away as they have protected the child during their lifetimes. Given the cost of long-term care for a special needs child, you should consider whether government benefits can be helpful in meeting some of those needs. A typical plan for an individual may include drafting a will and creating a special needs trust. Also important are designations of trustees, a conservator in the event of future incapacity or a standby guardian for a developmentally disabled family member. In addition durable powers of attorney, living will and related documents should be in place. Finally, securing government benefits for a special needs child can enable that person to have the resources necessary for quality long-term care.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Click here to listen to this article as a podcast or subscribe to our podcasts on iTunes

Pooled trusts can be a good alternative to a special needs trust.  However, pooled trusts are not appropriate for everyone. To understand why, let’s take a step back and review some basics.

A pooled trust is a type of special needs trust.  Special needs trusts are designed to protect the assets of a physically or mentally disabled person, while still allowing that individual to receive government benefits.  To qualify for certain government benefits, such as Medicaid and Supplemental Security Income, an individual generally cannot own more than $2,000 of assets.

A special needs trust enables a physically or mentally disabled person to have an unlimited amount of assets set aside for their needs without being disqualified from government benefits.  This is because the assets held in a properly drafted special needs trust are not counted as that individual’s resources for purposes of qualifying for government benefits.  Funds set aside in a special needs trust allow the disabled individual to pay for extra care beyond what the government provides.

Pooled trusts are a way to provide the benefits of a special needs trust without having to set up and administer a separate trust. As with special needs trusts, pooled trusts can be funded with assets from a third party or assets of the person with special needs. Pooled trusts are required to be run by non-profit companies. The non-profit develops a master trust agreement governing all participants. In most cases, the pooled trust is administrated by a professional administrator, and the funds transferred into the pooled trust are then pooled and invested by an investment manager. Because a pooled trust accepts contributions from many beneficiaries, in theory the pooled trust is able to make more stable investments and provide additional management services that another type of special needs trust might not be able to provide. Like a special needs trust, transfers into a pooled trust do not preclude a person with special needs from receiving government benefits.

There are several distinctions between a pooled trust and a special needs trust.  For third-party assets, at the beneficiary’s death, the pooled trust will usually keep a portion of the beneficiary’s trust account to help fund other pooled trusts, while third-party special needs trusts allow 100% of the assets to pass to other family members of the beneficiary or anyone else chosen by the person who created the trust.   A pooled trust is managed by the manager selected by the non-profit and not by a friend or family member that has a personal relationship with the beneficiary.  In addition, with a pooled trust, the non-profit entity has control of the investments and disbursements. Once you surrender your money to the pooled trust you have no control over how it is spent or invested.

Despite these distinctions, pooled trusts can be a great option if the amount available to fund the trust is small or where there is no person able or willing to serve as trustee. You should consult an expert in this area to determine whether a pooled trust or classic special needs trust is more appropriate for your family.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Click here to listen to this article as a podcast or subscribe to our podcasts on iTunes 

There are certain ages in a child’s life that are benchmarks for changes.  For some children, turning age 17 is an important day, since that is when the child can obtain a driver’s license and for some age 18 is an important age, when they become emancipated and legally adults.  For children with special needs, there are also important ages when life changes occur.

Age 18 is a magic age in the life of a child with special needs.  Prior to age 18, assets in a parent’s name are relevant in determining whether the child is eligible to receive government assistance.  As a result, limited if any government programs are available to most children with special needs before they turn age 18.  Once a child turns age 18, their parents’ assets are no longer relevant in determining whether they are eligible for many forms of government assistance.  Specifically, Social Security Income (“SSI”) and Medicaid are available to a child with special needs who meets the definition of disabled at age 18, depending upon the resources and income available to that child.  Generally speaking, a child cannot have assets in excess of $2,000 without compromising eligibility for government assistance.

It is important as your child approaches age 18 to ensure that there are no assets in the name of your child if government assistance would otherwise be available.  Any resources in the child’s name should be spent towards the child’s care.  If there are substantial resources beyond the amount needed to provide for that child, another option is to contribute assets to a pooled trust or a first party special needs trust.  In most cases, these contributions will not preclude the child from receiving government assistance although both a pooled trust and a first party special needs trust (discussed in more depth in prior blog articles) are fairly restrictive in their use and operation.  Better yet would be to ensure that no assets are ever accumulated in the name of your child with special needs.

Another issue which must be addressed as a child approaches age 18 is whether the child has sufficient ability to provide for himself or herself and handle their own financial and medical decisions or whether a guardianship action is appropriate to permit parents to continue to handle financial and medical decisions as guardians.  Guardianship proceedings takes three (3) to six (6) months to complete, and is handled through the Court.  As such, if it makes sense to have a guardian assume financial and medical responsibility for a child at age 18, this process should begin in or around the middle of the child’s 17th year.  If a child can handle his or her own affairs and simply needs assistance by parents, the child should sign a power of attorney and health care proxy when the child turns age 18 to permit parents to assist them with financial and medical decisions.  This does not remove autonomy from the child and ultimately the child’s decision controls; however, it will allow parents to assist the child with the child’s consent.

• Email This
• Print
• Trackbacks
• Share Link

A New Jersey appeals court upheld Medicaid’s denial of benefits after finding that the First Party Special Needs Trust for the benefit of the applicant did not shelter the applicant’s assets.

Medicaid determined, and the court agreed, that a First Party Special Needs Trust will not shelter an applicant’s assets unless and until the Social Security Administration or the New Jersey Disability Review Team determines that the beneficiary of such trust meets the federal definition of “disabled.” In other words, the fact that the applicant may meet the definition of “disabled” is irrelevant unless the Social Security Administration or the state Disability Review Team actually makes this determination.

In addition, the court agreed with Medicaid’s determination that the Special Needs Trust was not an irrevocable trust as required by law because the terms of the Special Needs Trust allowed the trust to terminate if it was deemed an available resource to the beneficiary for purposes of obtaining state or federal benefits.

Interestingly, this Special Needs Trust was previously approved by a New Jersey Law Division judge in connection with the applicant’s workers’ compensation case.

If you or a loved one is the beneficiary of a New Jersey First Party Special Needs Trust, you should have an attorney review the trust in light of this case in order to avoid a similar result.

For the full text of the case, see J.C. v. Division of Medical Assistance and Health Services (N.J. Super. Ct., App. Div., Nos. A-5632-07T25632-07T2, A-6297-07T2, Feb. 8, 2010).
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Individuals who become disabled as a result of an accident may receive a monetary award as part of a legal settlement of the case. If this happens, it is important that the individual, prior to finalizing the settlement, speak with a special needs attorney to determine the best way for the settlement to be paid.

The two most common types of pay-outs are the structured settlement and the lump-sum payment. The structured settlement often consists of an income stream (in the form of an annuity) as well as lump-sum payments that may be made at certain times, such as certain birthdates. The payments are usually based on the beneficiary’s life expectancy.

Whether an individual elects a structured settlement or a lump sum, these assets are considered assets of the individual. If, as a result of the disability, the individual would qualify to receive government benefits such as Medicaid but for the monetary award, the individual should consider having the award distributed to a trust for his or her benefit. An individual cannot have assets in excess of $2,000 in his or her name in order to qualify for Medicaid and SSI. If the award is paid to the individual, this eligibility test is not met. If instead, these payments are made to a First Party Special Needs Trust, the individual’s eligibility for governmental benefits is preserved. At the individual’s death, the remaining trust assets will be used to reimburse Medicaid for any money it has expended. Any money left in the trust can pass to successor beneficiaries named in the trust.
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

There are two types of special needs trusts – one designed to hold assets gifted or bequeathed to a person with special needs from a third party (a “Third-Party Special Needs Trust”), and one designed to hold assets that are already deemed to be owned by that person with special needs (a “First-Party Special Needs Trust”).

A Third-Party Special Needs Trust is created to receive gifts and bequests from third parties, such as parents and other friends and family members. These trusts can be set up at any time to receive gifts or bequests from various friends and family members or can be set up under a parent’s (or other family member’s or friend’s) Will to just receive assets from that person’s estate.

Whether a Third-Party Special Needs Trust is set up during someone’s lifetime or under someone’s Will, the basic terms of the trust are the same. Third-Party Trusts provide that during the lifetime of the person with special needs, the trustee can use trust assets to provide for his or her well being after first considering the benefits which are provided through governmental assistance. The trustee is directed to use the assets for such child’s special needs, i.e. to obtain goods and services to maintain or improve his or her comfort, welfare and care, including luxuries beyond basic needs. The trustee can use assets to supplement basic health care services, to pay the expenses of his or her vacations, and to make improvements to real estate that would provide suitable housing for him or her. The trust is set up to preserve a child’s eligibility for whatever governmental benefits may be available under New Jersey law or the law of the state where the person with special needs resides.

At the death of the person with special needs, 100% of the remaining trust assets can pass to anyone that the grantor (creator) of the trust decides at the time of the creation of the trust. These beneficiaries are often siblings or other family members of the person with special needs.

A First-Party Special Needs Trust is a trust created to own the assets currently owned in the name of a person with special needs. These assets may be gifts or bequests from well meaning family or friends that were given to person with special needs either outright or in a trust that does not qualify as a special needs trust. These assets may also be assets received by a person with special needs in a lawsuit.

A First-Party Special Needs Trust can only be set up by a parent, grandparent, guardian or a court.  A First-Party Trust can only be set up for someone who is deemed disabled under the Social Security Administration definition. For a minor, a person would be considered disabled if he or she “has a medically determinable physical or mental impairment, which results in marked and severe functional limitations, and which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months.” An individual age 18 and older is “disabled” if he or she has a medically determinable physical or mental impairment, which results in the inability to do any substantial gainful activity; and can be expected to result in death; or has lasted or can be expected to last for a continuous period of not less than 12 months.

Under a First-Party Special Needs Trust (as with the Third-Party Special Needs Trust), the trustee can use trust assets to supplement (but not replace) any benefits or governmental assistance such person is or may become entitled to receive.

One major difference between a Third-Party and First-Party trust is that in a First-Party Trust, at the beneficiary’s death, the remaining trust assets will reimburse Medicaid for any monies expended while the Trust was in existence for medical care, home health care or nursing home care of the person with special needs. Thereafter, any other public assistance programs which have a valid right of reimbursement under state or federal law will be repaid.

Any remaining trust assets will pass to those persons appointed by the person with special needs in his or her Will to receive the assets. If a person with special needs is under the age of 18 and/or is incompetent, then the assets will pass to those persons entitled to receive the assets under the intestacy laws of New Jersey.

There are also many reporting requirements for a First-Party Special Needs Trust that are not required for a Third-Party Special Needs Trust. Any new appointment of trusteeship must be disclosed to the Division of Medical Assistance and Health Services. In addition, as is required under Medicaid regulations (10:71-4.11 of the New Jersey Regulations), the trustee must file annually an informal accounting of the administration of the trust’s assets, income and expenses with the agency charged with the beneficiary’s Medicaid eligibility re-determination. Additionally (as is required by state law), the State of New Jersey must be given 45 days advance written notice of any expenditure by the trust in excess of $5,000, or of any amount which would substantially deplete the principal of the trust. Finally, subsequent additions to the Trust must be reported to the appropriate determination agency (any agencies from which such beneficiary is receiving benefits, such as Medicaid).

Although the First-Party Trust may preserve some of the assets of a person with special needs during his or her lifetime, at that person’s death, the money is subject to the claims of Medicaid and other agencies. Therefore, it is important that assets are never titled in the name of a person with special needs in order to prevent the need for a First-Party Trust. However, if assets are already in his or her name, it is important to create a First-Party Trust to at least preserve the assets during his or her lifetime.
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

If you have an existing special needs trust, moving to another state could require a change to the trust in order to comply with the rules of the new state. This applies to both first-party trusts (trusts funded with the assets previously owned by an individual with special needs) and third-party trusts (trusts funded with assets gifted or bequeathed from third parties for the benefit of an individual with special needs).

Each state has different rules related to special needs trusts. For example, for third-party trusts, some states will recognize a basic discretionary trust as a special needs trust, while other states require more specific “supplemental needs trust” language to qualify as a special needs trust.

Each state may have different rules related to first party trusts, as well. Although many of the rules related to these trusts are imposed by federal law, many states require additional language or information in the trusts in order to ensure that the beneficiary of the trust who has special needs will qualify to receive governmental assistance. In addition, each state may have different reporting requirements. For example, some states require you to send a copy of the trust to each agency from which you are receiving benefits. Some states also require additional notice when certain dollar amounts are distributed from the trust. For example, in New Jersey, if an expense of $5,000 or more is to be paid from a first party trust, prior written notice must be provided to the New Jersey Division of Medical Assistance and Health Services.

Although special needs trusts are typically irrevocable, a well drafted trust should include a provision allowing the trustee (or the grantor in the case of a first-party trust) the right to modify the trust to conform with state or federal law. If your trust does not contain this language, and the state law of your new state does not allow a modification of the trust, you may need to apply to a court for a modification.
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

New Jersey's residents with special needs will benefit from the new $787 billion stimulus plan, signed by President Obama on February 17th.

New Jersey expects to receive $2.2 billion for its Medicaid program - a program that has been severely stressed as the economy has faltered. According to the Department of Health and Senior Services, Medicaid provides health care to over 1 million people in New Jersey and counting. The first $362 million slated for Medicaid will be paid to New Jersey right away. The rest of the money is expected to flow into New Jersey over the next two years.

Special education in New Jersey is also receiving help from the stimulus package – to the tune of approximately $360 million. Federal support nationwide for special education will grow by $12 billion over a two year period.

Details of how this money will be used is still forthcoming. Governor Corzine recently announced that two members of his administration, Chief of Staff Ed McBride and Comptroller Matt Boxer, will oversee the distribution of this money.
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Estate planning is an important aspect of an overall financial plan for any individual, but it takes on even greater significance for the parents of children with special needs. Parents of children with special needs face a number of unique estate planning decisions that should be carefully considered with professional assistance. These considerations include:

Naming guardians. If parents pass away, who will provide day-to-day care for the special needs child? This is a critical and difficult decision and must be provided for in the parents’ Wills.

Creating a special needs trust.  A special needs trust is a trust that permits (but does not require) distributions to a child with special needs for a variety of reasons. Often, distributions are permitted only to supplement but not supplant monetary support that the individual is receiving from governmental benefit programs such as Social Security Disability Income (“SSDI”), Supplemental Security Income (“SSI”) and Medicaid. Failure to create a proper special needs trust can inadvertently disqualify the special needs child for these programs. The trust structure is also important to ensure that assets are not placed in a child’s hands before the child is responsible enough to invest and use the assets prudently (if ever).

The choice of trustee for a special needs trust is another critical decision. A trustee should have financial savvy, should have the parents’ complete trust, and should be or become knowledgeable regarding the child’s needs.

Powers of attorney.  A power of attorney allows an individual to appoint people to manage his or her assets and make investment decisions on his or her behalf. Having this document avoids the necessity of having to go to court to get someone appointed as a guardian if an individual cannot manage his or her own affairs. A power of attorney is important for all individuals, but in a special needs situation, it is important for both the parents and the special needs child.

Parents of an adult child with special needs should also consider whether a power of attorney is adequate or if parents should be named as guardians of the adult child to better protect the child’s interests. If there is a concern that the child cannot adequately manage his or her own affairs at all or could be taken advantage of, a guardianship (full or limited) may be more appropriate.

Life insurance. Life insurance is typically used to ensure that sufficient assets are available to provide adequate income to the surviving spouse and to provide for the care of children until they finish schooling and are able to earn a living. In a special needs situation, life insurance can be used to fund a special needs trust to ensure there will be assets available for the rest of the child’s lifetime. This may be especially important if parents can no longer provide the care the child needs.

While estate planning is essential for any individual, for a parent with a special needs child it takes on additional significance.
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link