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

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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.

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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.

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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.

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