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Special Needs Trusts

New Jersey Special Needs Trusts Attorneys

" Special Needs Trusts " and Government Benefits

Child support is considered to be an asset of the child even though it is paid directly to the custodial parent. For a child with disabilities who is receiving Supplemental Security Income and/or Medicaid, child support may reduce or disqualify the child from receiving the benefits. Similarly, gifts and inheritances received outright by the child from third parties are also considered the child's assets for purposes of determining eligibility for government benefits. In order to avoid the reduction or elimination of public benefits, the child's assets should be assigned to a "Special Needs Trust".

Special Needs Trusts are also referred to as "Supplement Needs Trusts", as the stated purpose of the trust is to supplement and not take the place of any benefits or governmental assistance a child is entitled to receive. The assets of the trusts are intended to be used to enhance the beneficiary's quality of life while maintaining eligibility for the government benefits. The child with special needs will be the sole beneficiary of the trust. There are two types of Special Needs Trusts - First-Party Special Needs Trusts and Third-Party Special Needs Trusts.

First-Part Special Needs Trusts

A "First-Party Special Needs Trust" is designed to hold assets deemed to be owned by the special needs child and can only be set up by a parent, grandparent, guardian or a court. Rather than pay the child support to the custodial parent, the parent paying the support should assign it to a First Person Special Needs Trust, with the child named as the sole beneficiary. In addition to child support, the assets of a First Person Special Needs Trust may include gifts or bequests given to the special needs child outright or in a trust that does not qualify as a special needs trust, as well as assets received by the child in a lawsuit.

When the beneficiary of a First-Party Special Needs Trust passes away, the remaining trust assets are subject to the claims of Medicaid and other agencies for any benefits to the special needs child for services including but not limited to medical care, home health care or nursing home care. Therefore, it is better to avoid the need for a First-Party Special Needs Trust by not gifting anything outright to the child and by not allowing any assets to be titled in the name of the child. However, if assets are already in the child's name, such as child support, it is important to create a First Party Trust to at least preserve the assets during the child's lifetime.

Third-Party Special Needs Trusts

"Third-Party Special Needs Trusts" are created to receive gifts and bequests to the special needs child from third parties, such as parents, family members, or friends. They can be set up any time during the third-party's lifetime or can be established under the third-party's Last Will and Testament to receive assets from that person's estate.

As with First-Party Special Needs Trusts, Third-Party Trusts provide that during the lifetime of the special needs child, the trustee is directed to use the trust assets to provide for the child's well-being after first considering the benefits which are provided through governmental assistance. Unlike First-Party Trusts, 100% of the remaining trust assets at the beneficiary's passing can pass to anyone that the third-party (trust creator) decides at the time of the creation of the Trust, such as the siblings or other family members of the special needs child.

Establishing a Special Needs Trust is not a simple task. There are many legal requirements and formalities. If divorcing parents of the child with special needs are setting up separate Trusts, they should coordinate the funding of the Trusts to ensure that adequate resources will be available to the child. The Wills of both parents must be revised to provide that the Trusts will be the beneficiaries of their estates, not the other spouse or the child outright. New Jersey Special Needs Trust attorney, Richard C. Klein, Esq., and Chairman of Cooper Levenson's Family Law Practice Group is very experienced with the establishment and administration of Special Needs Trusts and understands the endless considerations that must be addressed. Call 856-528-0822 today or contact us online to discuss your child's Special Needs Trust.


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Cooper Levenson, P.A.
Family Law Department

Cherry Hill Office
1415 Marlton Pike East
Cherry Hill Plaza
Suite 205
Cherry Hill, NJ 08034
Phone: 856-528-0822
Fax: 856-857-5527
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Atlantic City Office
1125 Atlantic Avenue
Atlantic City, NJ 08401
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