When a special needs trust makes sense

Ask NJMoneyHelp

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 Q. My sister is developmentally disabled and lives in a group home. She works part-time and receives some government aid. What can I do to arrange for her to inherit my estate but not all at once?

A. The rules can be very tricky.

New Jersey’s Division of Developmental Disabilities now requires all residents of group homes for the developmentally disabled to qualify for the Medicaid Community Care Waiver Program, said Shirley Whitenack, an estate planning attorney with Schenck Price, Smith & King in Florham Park.

“In order to qualify for this waiver program, the group home resident’s income cannot exceed $2,199 per month in 2015 and his or her assets cannot exceed $2,000,” Whitenack said.

In addition, many group home residents are eligible for Supplemental Security Income (“SSI”), which is a monthly cash benefit program administered by the Social Security Administration and supplemented by New Jersey.

SSI recipients cannot have earned income in excess of $1,090 per month in 2015 or assets in excess of $2,000, she said.

An inheritance received by your sister outright could trigger ineligibility for such means-tested government benefits, Whitenack said.

“Inheritances made to a third party special needs trust, however, may be paid or applied in the discretion of the trustee to or for the disabled sister’s benefit to provide for her supplemental care and support without jeopardizing her benefits eligibility as the inheritance in the trust will be deemed `unavailable’ for purposes of determining her eligibility for means-tested benefits,” Whitenack said.

Because the trust will be funded with assets that were not owned by your sister, there is no requirement that the trust pay back any government benefits on the death of the trust beneficiary, she said.

“The trust can be a stand alone `living’ trust which remains unfunded until the reader’s death or it can be a testamentary trust established under the reader’s last will and testament,” Whitenack said.

You should consult with an attorney with expertise in special needs trusts to discuss options and to draft the special needs trust.

Email your questions to moc.p1508660003leHye1508660003noMJN1508660003@ksA1508660003.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.