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

In preparing a Will, parents of a special needs child must give careful thought as to how to divide up their assets among multiple children. In deciding how to allocate resources, consideration should be given to the financial needs of each child, the ability of each child to support himself or herself both currently and in the future and the message sent to children in the decision of how to divide assets. There is no right or wrong answer but the general default rule of estate planning to leave assets equally to children should not be an assumption which is accepted without careful consideration.

When all children are very young, often assets are divided equally among children since all children are dependent at that time. As children get older, where a special needs child will have a large portion of his or her needs met through government assistance and may not have the expensive lifestyle of other children, some parents cap the amount allocated to that child (after ensuring sufficient assets are available to supplement monies from government assistance to provide the lifestyle the parent wants for such child) with the balance of the assets distributed to the other children.

Alternatively, parents may decide that other children will be able to support themselves in the future so a larger share of the estate should be allocated to a special needs child.

In considering this issue, the value of the assets to be divided up must be considered as well as the anticipated expense of each of the children and potential sources of payment of these expenses (earned income, governmental benefits, potential outside inheritances, to name a few). Further, since all of these variables change over time, the decision on how to allocate assets among children should be revisited every few years.

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The following are some examples of expenses and distributions that can and cannot be made from a Special Needs Trust. This list is not exhaustive, but is meant to provide some guidelines as to the proper administration of a Special Needs Trust.

Permissible Distributions

1. Purchase of home or condo, as long as rent is paid by the special needs person at its fair rental value from income he or she receives from SSI or other sources (other than payments from the Trust);

2. Home improvements and repairs by a third party;

3. School tuition, books and supplies;

4. Vacation travel;

5. Entertainment, such as books and magazines, movies, plays, electronic equipment, games, etc.;

6. Insurance premiums;

7. Transportation (such as purchase of a handicap van, car or train tickets);

8. Telephone and cable television expenses;

9. Dental care and other medical costs not covered by any benefit program;

10. Medical equipment and medical expenses for care not covered by any benefit program.

Distributions Which May Reduce or Eliminate Government Benefits

1. Shelter expenses, such as mortgage payments, real property taxes, utilities, etc., if rent is not paid by occupants. If the Trust owns a home that the special needs person lives in and he or she does not pay rent, SSI and other benefits may be reduced and Medicaid may have the right to take the home after the special needs person’s death;

2. Food;

3. Clothing;

4. Cash paid directly to the special needs person.

You should contact legal counsel if you have any questions about distributions from a Special Needs Trust.

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Now is one of those times when it is important to revisit your planning. In the past few years, shifts in thinking by the Department of Health and Senior Services have resulted in positions being taken that would eliminate the effectiveness of many special needs trusts. In the past, under New Jersey law, it has been acceptable to create purely discretionary trusts where the trustees have the ability to use income and principal for the discretion of the special needs beneficiary, with no standard as to when the money should be used and in what manner. This created the greatest degree of flexibility in planning and was utilized much of the time. The alternative, the creation of a luxury trust that more specifically delineated how monies could be used, was less appealing as an alternative.

Due to constraints on government funds and an increase in the number of people becoming eligible for benefits in New Jersey, the government has taken a harder look at where benefits can be denied. Special needs children who have purely discretionary trusts have recently been denied eligibility for government assistance as a result of the trusts’ existence. There have been no changes in statutes or regulations that justify this change, however, as a result, it is critical that all special needs trusts be restructured as luxury trusts to best ensure that government benefits will be available to a child with special needs in the future.

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