New Jersey Special Needs Trust Attorneys
Providing for a Loved One With a Disability Without Losing Their Benefits
Families with a loved one who has a disability face a planning problem many estate plans do not cover. Loved ones with disabilities may receive Medicaid or Supplemental Security Income (SSI), and leaving them money directly can actually cause them to lose those benefits. A special needs trust is built to solve this exact problem, letting a person with a disability benefit from an inheritance or a settlement without losing the public benefits they depend on.
Williams Law Group, LLC helps families across Morris County, Essex County, Bergen County, and all of New Jersey set up and manage special needs trusts as part of our broader estate planning practice. This work often overlaps with guardianship and overall estate planning.
Maybe you are planning ahead for a child who will need lifelong support, protecting a recent settlement for an adult family member, or adjusting an inheritance to fit your family’s specific needs. Whatever your situation, our attorneys can assist in building a plan that works for you. If special needs planning is part of your family’s future, contact us to schedule a consultation.
What Is a Special Needs Trust?
A special needs trust is a trust that holds money and property for a person with a disability, managed by a trustee rather than the beneficiary. A trustee is the person or company that manages the trust for the benefit of the beneficiary. The aim of the trust is to exclude the assets from countable resources for Medicaid and SSI purposes.
The trustee can use trust funds to pay for things like therapy, education, transportation, home changes, and recreation, without disrupting the beneficiary’s eligibility for essential government assistance. This only works if the trust is prepared correctly. A trust that is vague, improperly funded, or missing required language can be counterproductive and achieve the opposite of an intended goal. As a result, special needs trusts require careful, experienced drafting.
Estate Planning for Parents and Family Members of a Person With a Disability
Special needs trusts are usually just one part of a larger planning picture for families caring for a loved one with a disability. Parents raising a child with a disability often need to think through additional considerations, such as who will step in as caregiver if necessary, how to appropriately protect a loved one’s government assistance or benefits, and what legal changes occur once that child reaches the age of majority.
Adult children caring for a parent or siblings caring for a brother or sister with a disability face similar questions about their own estate plans. We work with parents and family members at every stage of this planning process, from young children to adults who have long since aged out of school-based services. We help to build a plan around the specific person and the family’s specific circumstances.
Meet Our New Jersey Special Needs Trust Lawyer
Attorney Jackie Lasher is an Associate at Williams Law Group, LLC who advises families on special needs trust planning, disability-related estate planning, and guardianship matters. Jackie works with parents planning ahead for a child’s lifelong needs, individuals requiring a trust for the protection of benefits, and families addressing a potential inheritance that was not planned with benefits in mind.
Jackie takes the time to understand each family’s specific situation before recommending an approach, knowing that special needs planning touches deeply personal territory involving a loved one’s care, independence, and long-term security. She is admitted to practice law in both New Jersey and New York.
FAQ About Special Needs Trusts in New Jersey
Special needs trusts involve overlapping state and federal rules, so clear answers make a real difference before you start planning.
- What is a special needs trust, and who is it for?
- What is the difference between a first-party and a third-party trust?
- What is a third-party special needs trust, and how does it work?
- What is a first-party special needs trust, and when is one needed?
- Will a special needs trust actually protect Medicaid and SSI eligibility?
- Why do Medicaid and SSI have such strict rules about inherited money?
- Can I leave money to my child with a disability in my will without having a trust in place?
- Should special needs trust language be included directly in a will or living trust?
- What can a special needs trust actually pay for?
- Does a special needs trust require court approval in New Jersey?
- When does creating or funding a special needs trust require going to court?
- Is there a limit on how much money can go into a special needs trust?
- What happens to the money left in trust after the beneficiary passes away?
- Who should serve as trustee?
- What should a trustee know before spending from a special needs trust?
- My family member already received a settlement without having a trust in place. Is it too late?
- What if a person with a disability was already named directly on a life insurance policy or under a will?
- What should happen first when a personal injury settlement is involved?
- How does this fit with the rest of my estate plan?
- Why should special needs planning be part of a broader estate plan?
- Does a special needs trust affect the family’s own estate plan?
- What happens to the trust if the trustee can no longer serve?
- How do I get started?
What is a special needs trust, and who is it for?
A special needs trust is a legal tool that holds assets for a person with a disability without those assets counting against the resource limits for government assistance such as Medicaid and SSI. It is meant for anyone with a disability who receives, or may need, government benefits, including both minor children and adults.
What is the difference between a first-party and a third-party trust?
A third-party trust is funded with money that never belonged to the beneficiary, usually money from a parent or other family member. A first-party trust is funded with the beneficiary’s own money, often from a settlement, judgment, employment, or a direct inheritance. First-party trusts are governed by additional federal rules that do not apply to third-party trusts, including rules concerning how funds remaining in trust after the beneficiary’s death are treated and distributed.
What is a third-party special needs trust, and how does it work?
A third-party special needs trust is funded with money that never belonged to the beneficiary, usually coming from a parent, grandparent, or other family member. These trusts are common and useful when parents wish to leave an inheritance to a child with a disability without cutting off crucial benefits. They can also be utilized when a family wants to set money aside during their lifetime for a loved one’s long-term needs.
Third-party trusts offer more flexibility than first-party trusts in some important ways. Because the money never belonged to the beneficiary, these trusts are not subject to the Medicaid payback rule that applies to first-party trusts. This means that any funds remaining in trust when the beneficiary passes away can go to anyone designated by the person establishing the trust, such as the beneficiary’s siblings or other family members.
We help parents and family members set these trusts up either as standalone documents or as provisions built directly into a will.
What is a first-party special needs trust, and when is one needed?
A first-party special needs trust, also referred to as a self-settled trust, is funded with money that belongs to the person with the disability. Most often, this can include the proceeds of a personal injury settlement, a court judgment, or a direct inheritance.
It may be appropriate to establish a first-party trust when an eligible individual is about to receive, or has already received, a significant sum of money in their own name that would otherwise disqualify them from Medicaid or SSI.
For the traditional first-party special needs trust exception, the beneficiary generally must be disabled and under age 65 when the trust is funded with their assets.
Federal and New Jersey law set specific rules for these trusts, including who is legally permitted to establish the trust for the benefit of the beneficiary. Additionally, any money remaining in the trust following the beneficiary’s death must first go towards reimbursing the state for any Medicaid benefits provided during the beneficiary’s lifetime.
Because first-party trusts follow stricter rules, they need careful drafting and careful funding.
Will a special needs trust actually protect Medicaid and SSI eligibility?
Yes, a special needs trust can protect an individual’s eligibility for government benefits if it is drafted and managed correctly. The trust has to include specific language required by federal and New Jersey law, and the trustee has to be mindful in the way it is managed. This matters because Medicaid and SSI apply strict income and resource limits designed to reserve benefits for people with genuine financial need, so even a modest inheritance left directly to a beneficiary, rather than to a properly drafted trust, can serve to jeopardize eligibility or cause benefits to be reduced or suspended in full.
An improperly drafted or managed trust can fail to protect crucial eligibility, which is why working with an experienced attorney matters.
Why do Medicaid and SSI have such strict rules about inherited money?
Medicaid and SSI are both means-tested programs, which means they are designed to provide support to people who genuinely need it, based on strict income and asset limits. Because of this, the rules do not distinguish between money that was earned and money that was inherited or received as a gift. Any significant sum received directly, even with the best of intentions behind it, is treated the same as any other asset the recipient personally owns.
This is why a special needs trust is so important. By holding the money in a properly structured trust rather than in the beneficiary’s own name, a family can provide real financial support without triggering the same resource limits that would apply if the money were given directly to the beneficiary.
Can I leave money to my child with a disability in my will without having a trust in place?
You can, but doing so may jeopardize your child’s Medicaid, SSI, or any other means-tested benefits they may be receiving when they receive the money. Most families are better served by putting special needs trust language directly into their will or living trust, so that any inheritance meant for that child flows into a properly built trust instead of going to them directly.
Should special needs trust language be included directly in a will or living trust?
For most families, yes. Rather than creating and funding a separate special needs trust document immediately, many parents and family members instead choose to build special needs trust provisions directly into their existing will or living trust. That way, if something happens to the parent, the inheritance automatically flows into a properly structured trust for the child or family member with a disability, instead of passing to them directly and putting their benefits at risk.
A well-written plan provides for the loved one with a disability in addition to other family members and beneficiaries. It keeps every part of the estate plan, from the will to any existing trusts, working together instead of in conflict.
What can a special needs trust actually pay for?
Special needs trusts are intended to supplement, and not replace, the benefits a person already receives. They can cover a wide range of services or expenses, including things like therapies, special equipment, education, entertainment, transportation, home changes, recreation, and personal care items. What the trust can pay for depends on the specific program involved, so a trustee should understand these rules before making any payments or distributions from the trust.
Does a special needs trust require court approval in New Jersey?
Not necessarily, but it may, depending on the type of trust that is established, how it is funded, and the circumstances that may already be in place. Some first-party trusts, especially those funded through a settlement or judgment, require court approval while third-party trusts created through a will or living trust usually do not require any court intervention or approval.
Court approval can also be required if a trust document requires modification to its existing terms, such as adding a successor trustee or adjusting distribution provisions to reflect a change in the beneficiary’s circumstances. We can assist families in either scenario, whether they are establishing or modifying a trust with or without required court approval.
When does creating or funding a special needs trust require going to court?
Court involvement typically comes up in two situations. The first is when a first-party trust is being funded with money from a settlement or judgment, since the court overseeing the matter often must approve the trust terms before it can be funded.
The second can occur in the event a trust’s terms require modification, such as naming a new successor trustee or adjusting how distributions are made to reflect a change in the beneficiary’s needs. The need for court intervention under these circumstances will also depend on the trust terms themselves.
Third-party trusts created through a will or living trust generally do not require this same court involvement at the outset, since they are established under the terms of the will or trust itself rather than funded directly from litigation proceeds.
Is there a limit on how much money can go into a special needs trust?
No. There is no dollar limit on how much a special needs trust can hold, which is one of its biggest advantages over leaving assets directly to a beneficiary. What matters is how the trust is drafted and how distributions are made, not the size of the trust itself.
A trust holding a modest settlement and a trust holding a large inheritance follow the same basic rules, though larger trusts often benefit from more detailed guidance on investment and distribution decisions.
What happens to the money left in trust after the beneficiary passes away?
This depends on the type of trust. First-party trusts generally contain payback requirements, meaning remaining funds must be utilized first to reimburse the state for any Medicaid benefits provided during the beneficiary’s life. Third-party trusts are not subject to this payback requirement, and any remaining trust funds may pass to other family members or beneficiaries designated by the person who established the trust.
Who should serve as trustee?
A trustee is responsible for managing the trust funds, understanding limitations and rules regarding what the trust can pay for, and keeping clear trust records. This is an important role, so many families choose a trusted family member to be a trustee, and sometimes that family member is paired with a professional trustee for larger or more complex trusts. The right choice depends on the size of the trust, family dynamics, and the beneficiary’s needs.
What should a trustee know before spending from a special needs trust?
Serving as trustee of a special needs trust is a real, ongoing responsibility, not a one-time task. Before making any payment or distribution, a trustee has to understand what the trust can and cannot cover without jeopardizing the beneficiary’s Medicaid or SSI eligibility. This is because certain distributions, particularly payments involving shelter costs, can affect SSI even when the trust is otherwise properly structured.
A careful trustee should keep detailed records of every distribution and understand the difference between supplemental items the trust can appropriately pay for and coverage for basic needs that should otherwise be covered by government assistance that is received. A trustee should take special care and seek professional advice if needed prior to making any large or out-of-the-ordinary distribution. Expenditures under a first-party trust that exceed a certain threshold amount, for example, also require notice to the appropriate governing authorities. We advise trustees on these responsibilities and this type of decision making.
My family member already received a settlement without having a trust in place. Is it too late?
Not necessarily. The options depend on how much time has passed, whether the settlement funds have been distributed already, and whether receipt of the funds has been reported to government agencies. In some cases, a special needs trust can still be established. Seeking timely legal advice may preserve some of your options moving forward.
What if a person with a disability was already named directly on a life insurance policy or under a will?
This happens more often than families expect, perhaps because a policy or account was set up years before an intended beneficiary became eligible for benefits, or simply because the policyholder is not aware that a payout could disrupt receipt of those benefits. If a person with a disability is about to receive a life insurance payout or an inheritance directly, and no trust is in place yet, there may still be time to act before the funds are actually paid out.
Once the money has already been received, the options become more limited, but they may still exist. It may still be possible under the circumstances to establish a trust to hold remaining funds.
What should happen first when a personal injury settlement is involved?
Timing is everything. Ideally, the special needs trust should be established and ready to receive the funds before settlement proceeds are distributed to the beneficiary. When a trust is in place from the start, the settlement can be directed straight into the trust, which prevents the funds from being treated as unprotected countable resources for eligibility purposes.
We regularly work alongside personal injury attorneys to coordinate this timing, so that by the time a case settles, the trust is already drafted, funded correctly, and ready to receive the proceeds without disrupting the beneficiary’s Medicaid or SSI eligibility.
How does this fit with the rest of my estate plan?
Special needs planning works best when it is built into a family’s larger estate plan, and not addressed on its own. This means considering special needs planning in coordination with the preparation of a will or living trust and consideration of guardianship in the event a higher level of support for a loved one with a disability is needed.
Leaving assets directly to a loved one with a disability, even with the best intentions, can undo years of careful benefits planning. Our attorneys assess a family’s entire estate planning needs when planning for the future.
Why should special needs planning be part of a broader estate plan?
A special needs trust does not exist in a vacuum. The goal is to coordinate a family’s estate plan and prevent any unintended results from a will distribution, beneficiary designation on a life insurance policy, or even receipt of funds from a jointly held account which can accidentally undo the protection the trust was designed to provide.
For example, a grandparent’s outdated will, or a retirement account that still individually names the beneficiary instead of the trust, can result in the precise situation the family worked hard to avoid.
Coordinating every part of an estate plan helps to reduce the risk that another document or beneficiary designation will undermine any established special needs trust.
Does a special needs trust affect the family’s own estate plan?
A special needs trust, if appropriate, should be built into a family’s overall estate plan, and not treated separately. Parents often update their wills to route a child’s inheritance through the special needs trust automatically. Structuring your plan this way also provides family members with clarity about how the plan is meant to work.
What happens to the trust if the trustee can no longer serve?
A well-drafted special needs trust names one or more successor trustees who can step in if the original trustee dies, becomes incapacitated, or simply can no longer serve for any other reason. If a trust does not name a successor, or if all named successors are unavailable, a court application may be required to appoint a new trustee so that the beneficiary’s needs continue to be met without interruption.
How do I get started?
The best starting point is a consultation. We will learn about your family member’s needs, whether a loved one is currently receiving benefits or is expected to receive benefits, whether your loved one is expecting a settlement or inheritance distribution, and whether you have current estate planning documents in place. From there, our attorneys can recommend whether a first-party trust, a third-party trust, or another available estate planning vehicle may be appropriate for you and your family.
Protect Your Loved One’s Future Without Risking Their Benefits
Special needs planning can ensure that a loved one with a disability can benefit from your generosity, or from a settlement they are owed, without losing the government support they rely on. Williams Law Group, LLC works with families across Morris County, Essex County, Bergen County, and all of New Jersey to establish special needs trusts that serve to maintain this crucial assistance.
Contact us today to schedule a consultation with a New Jersey special needs trust attorney who cares and understands what is at stake for your family.